I'm not an economist or a politician or a banker. But i have often believed the mantra "consider the source"
George Bush refers to the 700bn bailout package agreed to by "both parties" with the repeated phrases that "i'm confident" that this measure will re-establish confidence in the markets.
Let's see, this is George Bush who was confident about weapons of mass destruction; who was confident in a short war in Iraq; that Saddam was involved in Al Quaida. He's confident in a plan architected by two unelected officials who oversaw over inflated housing prices and suppressed inflation rates. No wonder the markets abroad haven't particularly rallied.
But as a non-economist and non-american (that's a canadian, not a us accent), i find myself asking the question: why is bailing out wall street banks an appropriate course of action? You know what's amazing? both the left wing way out there and the right wing way out there agree with Bush on one thing: if you do nothing "this sucker is gonna go down" - and they both say "let it" for amazingly similar reasons
While i do not agree with all his politics, like many others, i find myself drawn to the frankness and clarity of Senator Ron Paul, so it's to his web site that i went looking for some perspective other than the Status Quo Rep/Dem collusion that a "bailout" debated for only a week is the absolutely only and essential solution.
Here's the summary of what Paul said to Congress today:
In conclusion, there are three good reasons why Congress should reject this legislation:
a. It is immoral—Dumping bad debt on the innocent taxpayers is an act of theft and is wrong.
b. It is unconstitutional—There is no constitutional authority to use government power to serve special interests.
c. It is bad economic policy—By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.
Monetary reform will eventually come, but, unfortunately, Congress’ actions this week make it more likely the reform will come under dire circumstances, such as the midst of a worldwide collapse of the dollar. The question then will be how much of our liberties will be sacrificed in the process. Just remember what we lost in the aftermath of 9-11.
The best result we can hope for is that the economic necessity of getting our fiscal house in order will, at last, force us to give up our world empire. Without the empire we can then concentrate on rebuilding the Republic.
Prior to Paul's speech, there was no such explicit direction of what to do in lieu of a bailout. There were however links to the Mises Institute Bailout Reader. These are approaches to the economy that reflect the Austrian School perspective to economics. One recent article, The Idiocy of Wall Street asks the simple and compelling question: why listen to Bernanke and Paulson? These are the folks, its argued, who got the world into this mess; why trust them to find a way out of it that will be of general benefit? Good question. And since the bailout has been announced, the piece that gets tossed out by Pelossi over and over again is "no more golden parachutes" for bank executives. Excuse me? How does curtailing the salaries of a privileged few help the thousands of people whose mortgages are being forclosed?
In the Bailout reader, you'll find a raft of reasons for disbanding the federal reserve. I was surprised to learn some months ago that there's nothing federal about the Reserve. It's just a big ol' bank run by bankers, and apparently as evidenced by the bail out, for bankers.
Now on the left hand side of the information aisle the questions and consensus seem to be remarkably similar: that anyone voting for the bailout in the US is simply in cahouts with the banks. Right now senators and congressMEN are posturing to say heh this is bad; it's not helping anyone to bail out fat cats. Democrat Dennis Kucinich said
The $700 billion bailout for Wall Street, is driven by fear not fact. This is too much money in too a short a time going to too few people while too many questions remain unanswered. Why aren't we having hearings on the plan we have just received? Why aren't we questioning the underlying premise of the need for a bailout with taxpayers' money? Why have we not considered any alternatives other than to give $700 billion to Wall Street? Why aren't we asking Wall Street to clean up its own mess? Why aren't we passing new laws to stop the speculation, which triggered this? Why aren't we putting up new regulatory structures to protect investors? How do we even value the $700 billion in toxic assets?
But let's see what happens when it comes down to the vote. Who of the big talkers are going to suck it up and just vote? Meanwhile, those not seeking reelection on the left have a similar analysis of the system at play as do the Austrian Schoolites, seeing the Fed. Reserve as part of a a "banker's coup"
Later on in this article, we see suggestions for points echoed in Paul's remarks, but puts some meat on them:Roubini is right on all counts. So far, more than a 190 prominent economists have urged Congress not to pass the $700 bailout bill. There is growing consensus that the so-called "rescue package" does not
address the central economic issues and has the potential to make a bad situation even worse.
The Bankers' Coup Financial industry rep. Paulson is the ringleader in a bankers' coup the results of which will decide America's economic and political future for years to come. The coup leaders have drained tens of billions of dollars of liquidity from the already-strained banking system to trigger a freeze in interbank lending and hasten a stock market crash. This, they believe, will force Congress to pass Paulson's $770 billion bailout package without further congressional resistance.
It's blackmail.
As yet, no one knows whether the coup-backers will succeed and further consolidate their political power via a massive economic shock to the system, but their plan continues to move jauntily forward while the economy follows its slide to disaster.
Market Ticker lays out framework for a workable solution to the crisis, but they must be acted on swiftly to rebuild confidence that major systemic changes are underway:The above is supposedly left-wing analysis. The word "coup" is also used over on the Huffington Post while still talking about the need for fundamental economic, systemic reform which this crisis requires. Coup? this effect is *intentional*? It's difficult to believe, but these bank collapsing dominos is an unpredictable coincidence? Meanwhile, over at the Mise Bailout Reader, we're reminded that one of the first things the fascists did was nationalize the banks.
1--Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Do it now. : (In other words, no more Enron-type accounting mumbo-jumbo and no more allowing the banks assign their own "values" to dodgy assets)
2--Force all OTC derivatives onto a regulated exchange similar to that used by listed options in the equity markets. This permanently defuses the derivatives time bomb. Give market participants 90 days; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy. (If trading derivatives contracts can damage the "regulated" system, than that trading must take place under strict government regulations)
3--Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly. (Ed: The collapse in the "structured finance" model is mainly due to too much leverage. For example, Fannie Mae and Freddie Mac had $80 of debt for every $1 dollar of capital reserves when they were taken into government conservatorship.)
If there's going to be a bailout, let's get it right. Paulson's $700 billion bill does nothing to fix the deep structural problems in the financial markets; it merely pushes the day of reckoning a little further into the future while shifting the burden of payment for toxic assets onto the taxpayer.
From the right, the bailout is seen as a case of government interference in a private sector issue. From the left it is seen as another instance of the government robbing from the poor to give to the rich. Both points of view are valid, and the combination tells a tale: the bailout is in fact a case of government interfering in the private sector to rob from the poor to give to the rich.
And that's why, to the extent that it was supported at all, the support for the bailout has been generated through the manipulation of fear, and fear, and more fear, and the dissemination of lies, and lies, and more lies.
Others have been asking that if it's possible to come up with 700bn, why is this the only problem that's getting addressed?
i confess i feel not much better informed about economics - there's a lot to way up, and no system is an ideal: no market is ever pure - who runs the market; who has the muscle to make one stall's carrot worth more than your stall's - but one thing does seem to be clear. This deal up for vote with the slimmest of discussions is being decided upon and rushed into by those who seem either complicit with the status quo as direct beneficiaries of it or at best too afraid to deal with it at any kind of fundamental level. And that means we will yes be paying and paying for it. As Ron Paul suggests,In theory, 30 billion a year, would put an end to world hunger. “As you treat the least of Me,” and if one of us is hungry, we all are. Hunger is the most painful and most avoidable plague on this planet. Let’s be generous and put five years worth aside, so we don’t have to think about it for a minute. In five years, the other expenditures would be having an impact anyway.
Bush vetoed 7 billion dollars to provide healthcare to children in this country, yet finds it acceptable to spend 700 billion bailing out foreign and domestic banks. I would allocate 100 billion to develop and implement a global health system ( in conjunction with any and all foreign governments ) that would ensure ( real ) healthcare to all people of this planet. Regardless of where, when, and why… As you treat the least of Me.
Bush vetoed 4.5 billion for education, while making more speeches about fiscal responsibility. I would allocate 100 billion towards ensuring an education ( in reality ) for every man woman and child on this planet. The cumulative knowledge and opportunity in the world would almost instantly increase exponentially, and the possibilities would become limitless.
By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.
The way the markets have NOT rallied based on the discussion around this "inevitable" bill, it seems both the extreme left and right agree that that next wave of crisis may come sooner rather than later, and be felt across more components of culture and rights than financial.
[update - 19:28 GMT] Goodness, the bill has failed in the house. BBC and Channel 4 hourly news refer to the markets as in "free fall" yet while the DOW dropped down 600 points, it went back up by 200 moments ago. This is the group of emotional knee jerk responses to whom we wish to hold ourselves hostage? And the House wants to REact rather than PROact before responding. Indeed, amusingly, CNN Live has a channel titled "BAILOUT VOTE REACTION" and it's an empty room, where highheels on wood floors can be heard in the background, and only an empty podium is in view. Elsewhere, blame is already being assigned to "partisan" politics and Speaker Pelosi's speech (no link yet). So what? amazing! But heh, alas, it ain't over. would that this were a sign of fundamental consideration rather than a single set back.
