One must gaze in wonder at a country which works for a couple of weeks on a plan to save the nation's economy and passes into law something which the vast majority of authentic economists claim cannot solve the problem it supposedly addresses. The most obvious deficiency is one I have seen described as its inverted methodology: the plan will buy up "troubled assets" from purchasers who hold mortgage-backed securities, on a worldwide basis, in order to establish a floor for the price of such esoteric obligations, and also to take them off the beleagured books of the banks and other holders. The solvency of the banks will thus improve, since their asset-to-liability ratios will improve, and that will allow and encourage them to start lending again.
October 03, 2008
October 02, 2008
So, when you read the fine print of El Bailouto, you discover its underlying themes, which have also been discovered by other Congress members uncooperative enough to actually read the damn thing. To wit,
October 01, 2008
It is the utter incompetence of George W. Bush which has led to sentiments such as this. It is axiomatic in the practice of legal negotiations, for example, that the side which controls the drafting of the first proposal has a tremendous advantage in the ultimate outcome of the deal. It's simply the way the human mind works: the opening offer sets the template or frame for what is possible. Yet when Bush, out of the blue, announced that America, unlike the economically thriving place he had described just weeks earlier, was on the verge of complete collapse, he filled the panic-stricken void with the stupidest proposal feasible. His Treasury Secretary, Henry Paulson, until recent years the Chairman of Goldman Sachs, one of the most likely beneficiaries of the huge bailout, rolled out a program which gave the Treasury Department absolutely unfettered discretion to dispense the largesse in any fashion he deemed appropriate to save the economy. The terse, skeletal, three-page "legislation" denied all other branches or agencies of the government, including the courts, any right to review any action taken by Paulson. It also empowered Paulson to hire any private outfit he wanted to help him with his unsupervised work.
September 30, 2008
I don't think the defeat of the $700 billion bailout signals a watershed event in American history, economic or otherwise. The House vote was political theater, of course; the Republicans in the House are staring at the abyss of losing another 30 seats or so to the Democrats, and they're desperate to create daylight between themselves and one of the most unpopular Presidents in history. So, with no avenue of corruption looking any better, they actually listened to their outraged constituents and voted down the bill. Will they hold to the "principled" position? It depends on the reaction of the stock market. Today it's up, and there is no news currently of another major financial institution going down. I half suspected yesterday that the Plunge Protection Team, that shadowy cabal of financial players who manipulate the market at the behest of the Treasury Department and operate out of some bunker in the Executive Branch, might have thrown their machinations into reverse yesterday to make the blood redder than it might otherwise have been. I haven't read that anywhere; just a suspicion of my own, since I don't trust this government any farther than I can throw it, and as bloated as it is, that's not very far.
|By: emptywheel Monday September 29, 2008 1:09 pm|
NASDAQ Jan 19, 2001 = 2770.38
NASDAQ September 29, 2008 = 1983.73
Dollar exchange with Euro, January 19, 2001: 1.068
Dollar exchange with Euro, September 29, 2008: .695
Thanks to Marcy Wheeler at emptywheel, you can see the entire trajectory of the Bush Boom, from inauguration through yesterday. The Dow is lower than when Bush started; NASDAQ, our technical sector, has been hammered; the cost of living has increased dramatically; and we've lost heavy-duty ground against foreign currencies, i.e., the dollar is weak. That is the trajectory of a bubble inflated by cheap credit from abroad, created when America indulged its final halcyon period as a consumer society and massively bought imports, and foreign sovereign wealth funds reliably recycled dollars to America at rates, after factoring in currency fluctuations, that were less than zero. That's not going to happen again. It is pointless to attempt to "restore" American prosperity based on the same principles when the necessary preconditions are gone.
That much maligned body politic, the American people (hell, I malign them myself) seemed to know instinctively that the "pitchfork moment" had arrived when Henry Paulson, who used to sell mortgage-backed securities when he was chairman of Goldman Sachs, proposed bailing out his friends, colleagues, and future partners from the consequences of their own systematic fraud, in which "Hank" himself was so deeply immersed his sclera turned brown. That rebellion or "uprising" by the gentle folk of these here United States won't last, of course. No one is interested enough in the long-term welfare of the United States to sustain their attention for the period sufficient to bring about real change. The corrupt federal government counts on that desultory, half-assed engagement to use the Treasury for what they see as its real purpose, personal aggrandizement and enrichment of themselves and close business benefactors.
So the system is so utterly broken that the reasonable, rational working-out of America's economic future won't happen as we might idealize it. It will gradually settle back to a level consistent with year 2000 house valuations and employment earnings, but with 2008 consumer prices and inflation. That is to say, in a significantly diminished state. There will be paroxysms and discontinuities in the glide path toward poverty, and many of these will be caused by useless attempts at intervention by the federal government. The net effect of "bailouts" will be to increase the stress of interest payments on debts to Treasury bill holders, foreign and domestic.
I saw a CNBC analyst this morning prognosticate that the Dow might fall to the 9,600 level. That is not so far from my prediction, long ago, that the Dow would fall to 9,100, which seemed fantastic at the time. I would consider the 9,100 level the "essential floor," and then the market's value would go up or down from there depending on our ability to adjust to our new penurious state. The USA needs to face one essential fact: the easy dominance we have enjoyed since the end of World War II is over. Cyclical predictions of boom and bust were based on this anomalous period. There is nothing automatic about future prosperity. It will require adaptation and retooling, and the current political structure is simply in the way of this. Thus, it will be necessary for this particular regime to fall apart entirely, Democrats and Republicans alike. That is what the pitchfork-wielding American commoner dimly perceived in his rebellion. If the fat cats in Congress lose their paymasters, they are one step removed from extinction, and their extinction is what we need more than anything.
September 29, 2008
(to the tune of "What Now My Love?")
It wasn't just the dumb formatting of the thing, such as Jim Lehrer's cute "Say it to him!" direction reminiscent of marriage counseling. That made your skin crawl, but Lehrer is just that sort of folksy presence; he wants people to like each other. It was simply that the debate was fundamentally stupid, much as the coverage of American politics is increasingly irrelevant and dumb, ossified within jingoistic parameters that never permit an actual airing out of what we used to call Reality. And when you don't talk about reality, but simply measure who's better at arranging the stock answers as zingers! or sound-bites, you know we are actively in the process of joining our one foot in the grave with the other one.
September 28, 2008
George Stephwhatever interviewed the surly John McCain for a few minutes on his show Sunday morning. McCain seemed to have undergone a beige makeup job which made him look less cadaverous than in recent TV appearances, which is good, but he spoke in that soft, furry monotone the whole time, which is not so good. I did pick up on McCain's basic trick, now that I know what to look for: it isn't difficult to find inconsistencies in any position Johnny Mac takes; his life is so full of inherent contradictions that they're hard to miss. He's the anti-special interest crusader, for example, whose campaign is wholly owned by lobbyists on the payroll of those very same corrupting influences. When George S. asked about Rick Davis, the lobbyist for Freddie Mac who runs McCain's campaign and whose lobbying firm, Davis Manafort, remained on the payroll of Freddie Mac until last month, McCain simply persisted in the obvious lie that Davis has not been connected to Freddie Mac "for years." That's how he handles criticism; anyone who points out that he's simply lying is playing the "politics game" and anyone can do that, after all. It doesn't "mean anything." McCain's work is too important and he's too much of a maverick to engage in politics as usual and play the back-and-forth game of modern elections, such as responding honestly to accusations he's lying through his clenched teeth. Since all criticism is politically motivated, it's equally meaningless in McCain's view - just part of the "process," so that even when he's accurately portrayed as a liar and con man it doesn't mean anything. People are only accurately describing him as a charlatan and hypocrite because he's running for office, so why pay it any mind? In that sense, McCain probably represents the final evolutionary stage of American media politics: a human being who underwent a soul-ectomy so long ago that there's no conscience left to bother.