Author: Todd

While we’re all consumed with the dynamics of the global economy this week the US micro economy is going down the toilet.  When we all wake up from this $700 billion dollar discussion next week we’re going to realize that we’ve lost more jobs last quarter than any other period since 1999.  The GDP is set to deflate to a record low and wages aren’t just stagnant anymore, they’re going down with the value of the dollar.

So is $700 billion gonna help?  The short answer depends on who you think it will help.  Will it help international foreign investors?  Yes.  Will it help Wall Street tycoons?  Yes.  Will it help banks?  Absolutely.  Will it help the majority of Americans who don’t care about accumulating anymore debt and just want their paycheck to cover their current bills?  Not just no, hell no.

The coming agreement between Congress and Sec. Paulson has pretty much been stripped of anything that will help the middle class.  I mean hell thier trying desperately to come up with some way to illustrate how this package does anything at all for working Americans.  It’s hard for them to do because their argument is that we need lending to keep the economy going.  In their words: banks need to be making money on interest or they will fail.

Well aside from my mortgage I’m glad I can say that I’m a banks worst nightmare.  I hate loans and the use of credit and I avoid it like the plague.  If all American’s and businesses adopted this policy America would go bankrupt according the administration.  Is this true?  Are we truely an interest revenue driven economy that cannot stand on it’s own without everyone carrying a burden of debt?  If so, that’s a damned shame and we should all be ashamed that we let it come to this.

The Chinese don’t use credit cards.  They don’t even use debit cards.  To this end they may own America one day if they own our debts.  Let’s play it out.  We sell our bad debts to the US government (our mortgages).  The US government runs a huge trade deficit to China using mortgage backed securities as collateral.  China calls the note due.

There you have it, a scenario where a foreign government can own our property because we could not pay our debts as a country.  It may be far fetched but 10 years ago so was the notion that the US government could foreclose on a home loan.  Government foreclosures are coming to a neighborhood near you soon.  Let’s just hope foreign foreclosures don’t follow in the next decade.  China could be putting Americans out on the street so the Hsui Huie family can move in.  Nice.

The current $700 billion bailout plan presented by the Bush administrations provides no concessions to help homeowners facing foreclosure or anyone on main street who’s experiencing a hardship. In fact, it will probably accelerate foreclosures. This is because banks would now have those losses insured by the feds and then when default occurs it will not effect any financial institutions bottom line after they’ve taken the loss write-offs from the sale of the mortgage backed securities. The institutions will no longer have any reason to work to modify sketchy loans they made FULLY KNOWING THE RISK.

This is exactly what the banks are counting on: indemnification for their bad lending practices. The call is to protect the markets, again. You can substitute the word markets with wealthy with any time during any discussion of this bailout. They’re interchangeable. Meanwhile, the guy who’s lost his job and is getting a re-trained or has transitioned into a lesser paying job and our property values will continue to be hurt. Property values will experience and even greater descent because the Bush administration’s bill is forgetting the reason peoples credit went bad in the first place. Foreclosures and property value declines are not the cause of this crisis, they are another symptom.

Stagnant wages, outsourced jobs, companies closing, inflation, sketchy bank tactics to increase revenue; these are the things that caused people to stop paying bills, using credit and caused a tight credit market. Until you take care of the problem at the source it will not really be solved. The current bill will only provide temporary relief in the markets and provide no relief to the underlying problems. It would be a $700 billion dollar farce that will stimulate our economy only for those on the top of the financial totem pole. It will do nothing to stimulate job growth, technical innovation, or most importantly stop foreclosures.

The Democrats are calling for these provisions as part of the bailout. They are interested more in helping the man on the street and not the CEO’s who’s employment contracts state they get a $10 million severance package if they’ve utterly failed. Is it possible they know this will also strengthen the US economy to a much greater extent than just protecting bad lenders? Of course, the Republican’s have responded with a typical partisan tactic stressing “urgency” and that there’s no time for pandering with the proposal they’ve laid out. Once again Bush pushes forward and it’s his way or no way. How is that a bi-partisan solution to the problem other than to say “we’re glad they saw it our way”?

Bush and crew are the same people who were on guard through this whole mess. Yet they think we should sign their first copy of a bailout proposal without scrutiny, without review and without modification.  I really think their motivation is two fold: They’re being pressured to save the wealth of their constituency, the US Aristocracy, and to make sure foreign investors holding mortgage backed securities don’t call the notes due. I could care less if either one of these end up being a by-product of the proposed bailout but it must first and foremost stimulate the US economy and bring rise to the dollar. From what I currently understand of this initial proposal it will not drive prices down, wages up, create jobs or stem coming foreclosures. If it succeeds, in it’s current form, banks may lend to banks but they will not lend to consumers in the end.

In this January 2008 article for Alternet Larry Bienhart, the author of Wag the Dog and Fog Facts: Searching for Truth in the Land of Spin, did an uncanningly good job at detailing all of the economics policies leading to the inevitavible bank failures that occured over the last couple of weeks.  I’ve always liked Bienhart’s writing and often hoped that one day my own prose would reach a fraction of his ability and style.  As far as I’m concerned Larry out performed himself with this article.  It narrows down, in specific detail, the failures of administrative policy that brought us to the downward spiral of the financial services industry.

To fully understand the article it’s nice to have some knowledge of the 1999 deregulation of the financial services sector that allowed commercial banks to start competing with investment banks.  Once this concept of deregulation is understood Bienhart’s article is easy to digest as an account of facts more than angry rhetoric.  Furthermore it clearly spells out the reasons we should be weary of McCain’s economic platform and why more tax breaks for wealthy corporations would be the most damaging path of policy any administration could pursuit.  Larry summed it up best in my favorite excerpt from the article:

“The administration largely believes in supply-side economics (otherwise known as “trickle down,” or “piss on the people.”); if you increase the supply of something, consumers will appear to buy it.

The actual results are a perverse triumph of the idea.

The supply of money was increased. The price of money was kept artificially low.

Think of borrowing as buying money. It is.

People (and businesses and corporations) did rush forward to buy it. Once they had it, what was there to do with it? There was no new trend, no dot.coms, no high techs, no bio techs, no nothing.

So they went out and sold money. That is, they made loans.

There are two big retail loan areas, credit cards and housing loans. Both were pushed very aggressively. With cheap, cheap money available to finance home buying, that market heated up. At the same time, commercial interests started aggressively buying up loans, packaging them together, and reselling them as financial instruments. That created more desire to make more loans (sell money). Financial institutions bought more money (borrowed), in order to sell it at a profit (make loans). Since the loans were quickly resold — and profit taken off the top — the quality of the loans didn’t matter to the people who made them. The housing market — or rather the loans that fueled it — grew into a bubble.

The subprime crisis, the housing bubble, whatever you want to call it, is not the problem.

It’s a symptom of pumping in money with no place to go.”

While Bush may not have been responsible for the initial deregulation this article is testament to the fact that we cannot continue to support the supply side or “give to the rich” economic policies of the Republicans which McCain endorsed at inception and continues to endorse to this day.

If we’re lucky McCain will just let the Caribou Bimbo speak in public a few more times.  It’s comical but at the same time demoralizing because this mindless airhead actually has a following.  One that is more about ideology than genuine understanding of complex economic and policy issues.  As long as she continues to proclaim that gay people can’t get married and that we ought to ban abortion those focused on these narrow issues (the ones they understand) will go out and vote for her, not McCain.  I live in NC and I can assure you most Republicans are still undecided about McCain.  He forgot to bring his bible.

We could have a bigger storm heading towards the US than Hanna and Ike combined. We’re heading towards Hyperinflation. Know what that is? Most people don’t.

Well you’ve got your typical recession, that’s a mess. They you’ve got Stagflation: That’s where prices and interest rates rise faster than the average wages. Then you have Hyperinflation: This is when prices quickly rise beyond our ability to afford common goods based upon real wages.

It’s argumentative what can be done to stop the looming problem. But I assure, without question that once the Necon economic policies are continued we are in big trouble. What’s McCain’s plan for creating jobs? More tax breaks for corporations. Yes, his concept is the same as the Bush economic policies: give them tax breaks it will create jobs. Bullshit. Trickle down economics failed the mighty Reagan, it failed Bush and now it will fail McCain.

These tax breaks will be recorded as additional revenues for the corporations and the richest 10% of investors (many of which are overseas) will continue to profit. Almost none, zero, no jobs will be created under this strategy. The “bailouts” will continue, the banks will face no scrutiny and they will survive on the good intentions of an increasing federal deficit.

Who suffers? The middle class. Now I’m not saying that the Obama plan is much better. I’m not certain there is a government plan that could help short of repealing NAFTA, which would only be a start. To overcome this crisis we need a completely new perspective in socio-economics in America. And if there’s anything Americans hate, it’s change.

Americans need to understand that the unregulated Capitalist economy so many strongly endorse is in fact their demise. Now quick, someone point at me and yell SOCIALIST PIG! I don’t care if you do because I firmly believe that any company left to police itself will only have one interest in mind that being revenue. Companies do not have the best interest of children, the elderly or any of the rest of us at heart.  It’s the governments job to protect us from the ravages of profiteering when harm is being done to American families.  “Buyer Beware” is an outdated, 19th century, snake-oil philosophy that is useless in our modern, purposely deceptive economic environment.

For so many the idea of capitalism vs. socialism is black vs. white. Most true Neocon’s would love nothing more than to see all social services and social safety nets disappear. Who cares about homeless and the crime rate? Those who can’t find a job didn’t go to college for an advanced financial or technical degree so they don’t deserve a job. But when you’re homeless don’t loiter on our beautiful streets – go to jail. That’s more or less the Aristocratic perspective of most hyper-religious social conservatives who’ve never in their lives faced a true financial challenge. Those who can’t compete take their place on the food chain in the system of incarceration. God forbid capitalism actually needs a middle class. But not a “middle class” measured at income levels above $150K a year in 2009.

Instead of seeing any shades of gray or middle ground Liberals and Conservatives will battle on issues where there is no compromise. And it doesn’t matter if more jobs are lost, gas and food become unattainable, foreclosures continue and banks get bailed out more and more often (or fail) while the majority of people can’t eat. As long as people are going to church three times a week and gays can’t get married then the “good people” of America will continue to vote for Sarah Palin and crew. And face it Neocons, you’re not voting for McCain, you’re voting for the ideals of his running mate Rev. Caribou Barbie.  You were never decided on McCain.

Unfortunately the Democrats don’t have much of an economic recovery plan either. But it’s better than the “give to the rich” theme that is openly promoted by McCain and company. And Obama cannot and will not overcome this. The voting population of rednecks have their glory girl and regardless of how ridiculous she is they will vote for her.

I realize not many are going to read this, or care. I just wanted it on the record so that when all the self-proclaimed “intellectuals” out there ponder how in the world the Democrats lost to yet another round to the Aristocracy and corporate kickbacks I can say I told you so.   Obama can’t win.  Rednecks decide elections in America and they care little about foreign affairs or economics.  They only know “God and Country”.  Whatever that means to them at the time.  Usually a bona-fide redneck, Neocon in a cowboy hat can’t even tell you in specific terms.