On Board the 'U.S.S. Titanic'
This article first appeared on Lewrockwell.com
On Thursday morning, September 18, 2008 a tragedy almost befell the 450 billionaires and 3,000,000 millionaires that live in the United States. The billionaires were on their way to becoming millionaires and the millionaires were about to leave the club. Luckily, Hank Paulson, U.S. Treasury Secretary, felt their pain. His $700 million portfolio was probably taking a bit of a haircut too. There are 305 million people living in the United States. The net worth of all the households in the U.S as of June 30, 2008 was $56 trillion. The 450 billionaires have a net worth of approximately $1 trillion and the 3,000,000 millionaires have a net worth of approximately $11 trillion. So, 1% of the population currently owns 21% of the net worth in this country.
Many of these billionaires and millionaires have accumulated their wealth by managing other people’s money. The customers never have the yachts. The money managers have the yachts. The .1% ruling elite are deciding the fate of your grandchildren in Washington D.C. this week out of public view. The ruling elite have the most to lose. Whose best interest do you think they are looking out for?
As I’ve watched the various business networks over the last few weeks, I sense desperation and fear among the commentators, pundits, and “experts”. It is a fear based upon self interest. Their lives depend upon the masses keeping their money invested in the market. They have overwhelmingly been in favor of the bailout bill. I wonder why. Jim “Mad Money” Cramer, who has a net worth of $100 million, is in favor of the bill. Larry “Free market capitalism is the best path to prosperity” Kudlow, a multi-millionaire, is 100% in favor of a socialist bailout of the criminal investment banks. They support this “blank check” to a government that is already $9.65 trillion in debt, because they want to maintain their lavish lifestyle, multiple estates, and prominent positions in society.
An honest balance sheet (as opposed to the balance sheets of US Banks) will always tell the true story. The balance sheet of U.S. households shown below explains the situation we are in today. The value of real estate rose 50% between 2002 and 2007, much faster than historical growth rates of 3% per year. The problem is that mortgage debt rose by 75% over this same time frame, resulting in owner’s equity as a % of real estate reaching an all-time low of 45.2% in June, 2008.
The assumption by homeowners that prices could only go up, supported by lies from the National Association of Realtors and Wall Street gurus, led homeowners to take $3 trillion of equity out of their homes and live a more lavish lifestyle than was warranted by their income. Consumer debt has risen 30%, while durable goods assets (which naturally depreciate) have only risen 24%. Financial Assets outpaced all classes, rising 55%, as the stock market came out of a bear market in 2003. The vast majority of this financial asset wealth increase benefitted the billionaire club and millionaire club. The rest trickled down.
click to enlarge
Many are now learning a hard lesson. Real estate asset values declined by $500 billion during the first 6 months of 2008, while mortgage debt continued to rise. Financial assets declined by 4%. The lesson being learned is that real estate assets and financial assets can and will decline. As the recession gets deeper and the bear market growls, asset values will decline by 10% to 20% more. The debt will remain and probably increase. With this proposed bailout, horribly run financial institutions will be relieved of all their bad debt. Who is going to relieve our debt? No one. The executives of these banks will continue to reap multi-million dollar pay packages, while we make their debt payments in the form of interest payments to the Chinese and higher taxes.
Icebergs Ahead
I can’t help but compare our country’s situation to the maiden voyage of the Titanic. Everyone has seen the movie, so can relate to the story. The captain (Alan Greenspan) has been handed the greatest ship (United States) ever made. It is unsinkable. The initial voyage across the Atlantic Ocean has drawn the rich elite ruling class (financers & bankers) onboard. But, the lower decks are filled with lowly peasants (Working Class) who are sneered at by those in the upper decks. A maiden voyage should always be taken slowly. A prudent captain would not take undue risks. Our captain (Alan Greenspan) wants to make his mark on history. He declares full steam ahead (reducing interest rates to 1%). Midway through the voyage, the captain is handed a telegram warning of icebergs (potential financial catastrophe) ahead. If he slows down the ship, he will not set the speed record. He ignores the warning and steams on to his rendezvous (eternal disgrace) with history.
In the middle of the night, the lookouts (Ron Paul, among others) scream iceberg!!! But, it is too late. The great ship (United States) has struck an enormous iceberg (banking crisis). At first, it seemed like everything is OK. There are no visible problems. But, below the waterline the great ship (United States) is taking on water (massive mortgage write downs). The engine room (Federal Reserve printing presses) works frantically to stem the damage. The captain believes that the compartmentalization of the ship will save it. The expert on the design of the ship (Nouriel Roubini) explains that the ship will surely sink. The captain orders the band (Hank Paulson) on deck to distract the masses from their imminent fate. The owners of the ship (U.S. government) never thought it could sink, so they didn’t provide nearly enough lifeboats.
To avoid mass panic, the crew (government bureaucrats) has locked the lowly peasants (Working Class) below deck. They will surely go down with the ship. But, here is where our story starts to deviate. The band (Hank Paulson) decides that the women and children (Middle Class) should not be saved first. The ruling elite (financers and bankers) are piling into the boats to escape their fate. The captain (Alan Greenspan) does not go down with the ship. In a cowardly act, he leaped onto the 1st lifeboat to be launched. So, this is where we stand today. The great ship (United States) is sinking. Should we let the band (Hank Paulson) dictate those who get onto the lifeboats first? If we do, we will all face the fate of Jack as he slowly freezes to death in the icy Atlantic.
The Big Lie
“If you tell a big enough lie and tell it frequently enough, it will be believed.”
- Adolf Hitler
We must pass this bailout bill before it is too late. This bailout bill is really for Main Street, not Wall Street. Trust the government, we’ve got the solution. Blah, Blah, Blah. The American people are tired of being lied to. Enough is enough. We’ve believed our government and financial “leaders”. They lied to us. We don’t believe them anymore. They cannot be trusted. This commitment of at least $700 billion was originally documented on 3 pages by Hank Paulson. Below is Section 8 from Paulson’s proposal.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Do we live in Nazi Germany? To have this language in a document is outrageous. Herr Paulson may have been able to run Goldman Sachs this way, but he now works for you and I. He serves at our discretion along with every other politician and government bureaucrat in Washington. They are so consumed by their power that they have forgotten that “We The People” dictate the future of this country. The public is overwhelmingly against this bill. Calls and emails are flooding Senators and Representatives to vote against this bill. If they ignore the people, it will confirm that they are as corrupt as many believe. The same people who created the problem, didn’t see it coming down the track, insisted there was a light at the end of the tunnel, and now see their elitist corrupt system falling apart, now want you to believe that they know best. President Bush summoned up his best WMD scare mongering speech, to try and convince the American public that we must do this before it is too late. If they pass this bill against the wishes of America, they should suffer the consequences by being voted out of office in November.
What the Future Holds
I am naturally drawn to people who tell the truth. President Bush, Hank Paulson, Ben Bernanke, Barney Frank (Can you believe our fate is in his hands?), and Chris Dodd have been lying to the American public for years. The truth is buried under a blizzard of their lies. We are supposed to believe the words of a multi-millionaire Harvard MBA President telling us we must trust the former CEO of Goldman Sachs who is worth $700 million and never saw this coming, with at least $700 billion of our money. There is no detailed plan, because they have no idea what they are doing. They are making it up as they go along. Once he has this authority, he will hire the same firms that caused the problem to manage the fund. This same President promised a quick Iraq war that would cost less than $50 billion with minimal casualties. The war has cost $700 billion so far. That number has a familiar ring. Over 4,000 brave Americans are dead. Over 30,000 have been wounded. This result does not give me confidence that he will be right this time.
The President is trying to scare the American public into supporting this bailout by saying we will go into a deep recession if we don’t pass it. I’ve got news for Mr. Bush. We are in a recession and it will be deep and long, whether they pass that bill or not. We have entered a massive deleveraging phase in America. Americans are learning that debt can destroy companies, people, and governments. They are slowly wakening from their hedonistic stupor and will begin to pay off debt and save. It will not be pretty for the economy, as retailers, homebuilders, developers, and restaurants go bankrupt by the thousands. This is supposed to be a capitalistic society. A deep recession will purge the excesses. If this bill is passed, Jim Cramer, Larry Kudlow, and the rest of the ruling elite will keep most of their millions. The average American will be pushed closer to the abyss as their home price continues to decline, their 401k stagnates or declines, they lose their jobs, and pay higher taxes.
Those telling the truth include Representative Ron Paul and Senator Jim Bunning. Their views on the bill are as follows:
Ron Paul’s words:
“Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike. The events of the past week are no exception. The bailout package that is about to be rammed down Congress’ throat is not just economically foolish. It is downright sinister. It makes a mockery of our Constitution, which our leaders should never again bother pretending is still in effect. It promises the American people a never-ending nightmare of ever-greater debt liabilities they will have to shoulder.
The claim that the market caused all this is so staggeringly foolish that only politicians and the media could pretend to believe it. But that has become the conventional wisdom, with the desired result that those responsible for the credit bubble and its predictable consequences - predictable, that is, to those who understand sound, Austrian economics - are being let off the hook. The Federal Reserve System is actually positioning itself as the savior, rather than the culprit, in this mess!
The issue boils down to this: do we care about freedom? Do we care about responsibility and accountability? Do we care that our government and media have been bought and paid for? Do we care that average Americans are about to be looted in order to subsidize the fattest of cats on Wall Street and in government? Do we care?
When the chips are down, will we stand up and fight, even if it means standing up against every stripe of fashionable opinion in politics and the media?
Times like these have a way of telling us what kind of a people we are, and what kind of country we shall be.”
Jim Bunning’s words:
“Most pressing is the $700 billion Treasury proposal that is being negotiated with the Chairman of the House Financial Services Committee. The Paulson proposal is an attempt to do what we so often do in Washington – throw money at a problem.
We cannot make bad mortgages go away. We cannot make the losses that our financial institutions are facing go away. Someone must take those losses. We can either let the people who made bad decisions bear the consequences of their actions, or we can spread that pain to others. And that is exactly what the Secretary proposes to do – take Wall Street’s pain and spread it to the taxpayers. The plan has not even passed, and already Americans are paying for it because of the fall in the dollar as a result of all the new debt we will be taking on.
I know there are problems in the financial markets, and I share a lot of the same concerns that our witnesses do. However, the Paulson plan will not fix those problems. The Paulson plan will not help struggling homeowners pay their mortgages. The Paulson plan will not bring a stop to the slide in home prices. But the Paulson plan will spend 700 billion taxpayer dollars to prop up and clean up the balance sheets of Wall Street. This massive bailout is not the solution, it is financial socialism, and it is un-American.”
The “American Rulers” are telling you we have no alternative. That is false. Smart thoughtful people like Dr. John Hussman and NYU professor Nouriel Roubini have been right on this issue for years and have proposed alternative solutions. John Hussman’s solution relies upon the rule of capitalism and wipes out the stockholders and bondholders of these bankrupt banks before placing any burden on the American people. The problem with this solution is that Jim Cramer, Larry Kudlow and the rest of the ruling elite would lose millions. To see Dr. Hussman’s proposal, go to his webpage.
The time to act is now. This bailout bill will punish your children and their children. The only way to stop it is by swamping your Representatives and Senators with phone calls, faxes and emails. Do it before it is too late. Remember the Government Motto: If you think the problems we created are bad, wait until you see the solutions.
If this bill is passed, I see the following implications to various passengers onboard U.S. Titianic:
Rich ruling elite
- In the short-term they will be joyous. The stock market will briefly soar as their millions will be protected.
- I would recommend that they buy some books about the French Revolution and the Russian revolution. The huddled masses have had just about enough. Class warfare is closer than it has ever been. The anger in this country is building. The passing of this bill against the wishes of the vast majority will be the trigger for civil unrest.
The Poor
- You’re screwed!!!
- You don’t have any money or investments, so you have nothing to lose. There will be less jobs. The money that Obama and McCain have promised you will be used to keep rich bankers rich. Sorry, you’re going down with the ship.
The Middle Class
- You’re really screwed.
- The dollar will decline. You will pay more for gas, food, and other basics.
- Interest rates will go up, making your debt more burdensome.
- Taxes will be raised and/or benefits will be decreased because the rich will need to maintain their lifestyle.
- Your home value will continue to decline for the next five years.
- Your salary, investments and 401k will not keep up with inflation, thereby reducing your standard of living.
- I recommend that you: pay off your car and use it for 10 years or 150,000 miles, whichever comes first; stop buying crap you don’t need; pay off your credit cards; try brown bagging your lunch; wash your car in the driveway; cut your own lawn; let your kids play outside rather than trying to dictate all their time; use your appliances until they break; if the cushion on your couch is ripped or stained, turn it over; contribute as much to your 401k as possible; and buy generics.
- If you own a home, stay in that home for the rest of your life. Pay down your mortgage. Make necessary repairs. Do not get a new kitchen or bathroom because your neighbor did. Do not borrow against your equity to buy stuff you don’t need.
- If you rent, continue to rent until you have at least 20% to put down on a house and can easily make the monthly mortgage payment using a 30 year fixed mortgage.
- If your Congressman or Senator voted for the bailout bill, vote them out in November.
Alan Greenspan
- His legacy has already been discredited. His actions in the last ten years will be seen as the root cause of all the financial problems America is experiencing today.
- Because of his reckless reduction in interest rates to correct the excesses of previous bubbles, the world economic system is on the brink of collapse.
- History will not be kind to Alan Greenspan.
Hank Paulson
- This multi-millionaire, former CEO of Goldman Sachs, will go down in history as the most pompous Treasury Secretary in the history of the United States.
- He isn’t the CEO of the United States. Harvard MBAs have already done enough damage to this country because they think they are smarter than the rest of us. They are not. They are responsible for this mess. It is time they leave the scene of the crime.
George Bush
- George’s administration will be another for the history books. This administration will surely be considered one of the worst in U.S. history. He entered office with budget surpluses and leaves office after saddling future generations with $4 trillion more debt and the promise of much more.
- He can retire to his Texas ranch, write his memoirs for $10 million, and make speeches at Neo-con conventions for $1 million a shot, knowing that the average hard working American is on the hook for $9.65 trillion of debt. I hope he enjoys his retirement. Millions of Americans will not enjoy theirs.
My final thought comes from a real working class American who emailed me this week with the suggestion for a bumper sticker.
"Imagine, who would Jesus give a trillion dollars to? The money lenders or the poor, homeless (and about to be homeless)."
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This article has 92 comments:
- CM in MA
- 78 Comments
Sep 26 08:00 AM"Warring against [the principles] of the people,... there is no length to which [the delusion of the people] may not be pushed by a party in possession of the revenues and the legal authorities of the United States, for a short time indeed, but yet long enough to admit much particular mischief. There is no event, therefore, however atrocious which may not be expected." --Thomas Jefferson to Samuel Smith, 1798.
- CM in MA
- 78 Comments
Sep 26 08:01 AM- Lea Cabrerra
- 18 Comments
Sep 26 08:01 AMJust about every major financial panic in our history was preceded by a period of central bankers flooding the free-markets at interest rates below the rate set by the markets.
It is the banks who distribute this money on behalf of central bankers and it is the banks and their executives who profit the most during these periods of easy money. Simply consider the net-worth of top Goldman exec' John Corzine, Robert Rubin, and Hank Paulson. Each walked out of Goldman Sachs with over $500 million. Funny how they end up in Washington to eventually clean up the mess that ultimately ensues. Their cure is always another tax-payer bailout or more easy money.
The game plan is simple for these banks. Create leverage of such size and scope that they become "too big to fail," and thus their survival is guaranteed by the ramifications of their failure.
These bankers dine and carouse with the very central bankers that finance such leverage via artificially cheap and counter-fit money. Without a central bank and its printing press, these jokers would be nothing more than a local used car salesmen.
Quoting Lord Acton, "The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
Later is now. It is the people versus the banks. To be more clear, it is the people versus the central bank. They imply to have a gun to our head and are asking for another $700 billion.
If "this sucker goes down", Alan Greenspan, Ben Bernanke, Robert Rubin, John Corzine, Hank Paulson, Anthony Mozillo, Franklin Raines and a number of others who have enriched themselves courtesy of the Federal Reserve will be more hunted than Osama Bin Ladin,
- Alan von Altendorf
- 264 Comments
My Website
Sep 26 08:03 AM- pochovilla
- 196 Comments
Sep 26 08:12 AMThe Titanic analogy was near perfect.
The situations that you describe are based on Common Sense and Truth. Combined with Integrity, these are three characteristics lacking in most Politicians and the self interest crowd.
America is about to go a massive expensive diet.
- OldLimey
- 146 Comments
Sep 26 08:12 AM- kowalski
- 50 Comments
Sep 26 08:19 AM*
As a side-note:
John Bremer published a newly discovered letter from Plato in: Plato and the Foundation of the Academy (2002), in which Plato explains the plan and philosophy behind his Polity (or Republic).
Some crucial paragraphs:
231. Now, it is hard for people to accept, but it is a fact that ALL THE CITIES OF THIS WORLD ARE BASED ON FUNDAMENTAL LIES. IT CANNOT BE ANY OTHER WAY and for a number of reasons, the first of which is that when children enter the world they find themselves in a pattern of unjustifiable social inequality. People born before them have an advantage over them – not through any greater merit or virtue on their part, but simply because they are older. Add to this the fact of economic inequality between individuals and between families and between cities and there are powerful elements making for instability. There are other inequalities – bodily health and strength, intellectual ability and interest, social position, inheritance and so on. Now, instability, especially if it becomes too pronounced, leads to social upheaval and revolution or tyranny, and sometimes both, and so a means is required to prevent – or, at least, minimize – the revolutionary tendency caused by unjustifiable inequality.
232. I say unjustifiable because there is nothing in reason to validate the inequalities among men. That they exist is undeniable, but there is no known justification for them in reason, so there must be one in convention. That convention is what I call “the noble lie,” I must admit to you, although it is always a lie, it is only “noble” in the best cases – when the inequalities are not too extreme, and the motive for keeping them is to prevent social or political instability, and there is a mechanism by which the inequalities can be gradually lessened. Every city has its own form of the lie (which is the principle of its education program), and the extent to which it is not believed is the measure of active internal repression. I say “every city” but, in truth, the cities we know are not unified – they are many cities, not one. MOST OBVIOUSLY, EACH IS AT LEAST TWO CITIES, A CITY OF THE RICH AND A CITY OF THE POOR.
- dieuwer
- 196 Comments
Sep 26 08:34 AMThis is surely bad advice. If the middle class wants to preserve their wealth as muc has possible they should close out their 401K and plow all the money in hard assests in their own possesion.
- john s. gordon
- 580 Comments
Sep 26 08:41 AM2. bailout - consider the cost of not doing it before you toss the idea in the wastebasket.
> jack
- danf
- 5 Comments
My Website
Sep 26 08:45 AMI don't know what the story is with what is happening in the economy. I don't know if the "bailout" is good or bad, will work or won't...It does seem that we have a debt and spending crisis. But the ranters against trying to save the sinking ship speak very glibly about allowing the economy to sink into deep recession at best.
Imagine unemployment at 15%. I remember the 80's and unemployment of 10% and interest rates at 15%. Of course we came out of that but it was not fun. And back then the service sector was 50% of the economy - not the 70% that it is now....
Rants are ok, but no solutions or even ideas are offered here...some people express fear as rage. That is what I see from this author
- Ken D
- 5 Comments
Sep 26 08:48 AM- IP Daily
- 18 Comments
Sep 26 08:54 AM~ The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries. ~
Sir Winston Churchill
- IP Daily
- 18 Comments
Sep 26 08:56 AM- Robt1947
- 26 Comments
Sep 26 08:57 AMIt provided some good information and it showed
you have good insight into what is happening.
I say lets lynch the b*******
- Canadian Guy
- 3 Comments
Sep 26 09:04 AMEvery Canadian needs to read this too because it's inevitable that whenever the U.S. suffers then Canada suffers too.
- Ken D
- 5 Comments
Sep 26 09:06 AM- Joe
- 17 Comments
Sep 26 09:14 AMHere an article to that:
"Where was media when subprime disaster unfolded?"
rinf.com/alt-news/medi.../
- eddie64
- 58 Comments
Sep 26 09:15 AMAs Butch Cassidy & Sundance Kid's famous line, "Hey, Who are those guys"????? The American people have a right to know, "If we're going to continue to dance with who brung us"!!!!!
- SteveB/Colorado
- 3 Comments
Sep 26 09:20 AMFinal note about Ron Paul. He's a great ranter, but has little in way of workable ideas.
- JGQ
- 51 Comments
Sep 26 09:24 AM- jcordes
- 48 Comments
Sep 26 09:33 AMYes it's true Bush is a "high functioning moron" whose administration will go down as the worst in history. It's true that because of his administration and the Republican rubber stamp Congress with their mantra of "self regulating free trade" and massive tax cuts for the super wealthy, that society has become polarized as never before, the economy has entered a phase of massive debt and the economic conservatism of the past has morphed into bible thumping demogoguery. So now what. Hunker down in your fall out shelter? Lynch the bankers and politicians? There are no life boats for a reason, it's not a boat, it's the entire economy and everything that entails. Maybe next time you could give us a workover analogy for Psycho or Its a Wonderful Life, both about as relevant as Titanic. I would suggest attempting actual analysis of the proposed solutions at hand, and leave the movie analogies at home.
- fatcat
- 442 Comments
Sep 26 09:38 AM- xsuddensam
- 242 Comments
Sep 26 09:44 AMGee, as long as we're going down, we might as well bang them up to the limit and default on the payments. Washington will surely come running and bailout the commercial banks. At least we'll be one step ahead of the criminals.
- Bubba Jones
- 5 Comments
Sep 26 09:54 AM- hoover
- 14 Comments
Sep 26 09:58 AM- JCC
- 19 Comments
Sep 26 10:24 AMAnalogous to your vascular system, the financial markets are the arteries of the economy. Analogous to your arteries, when the financial markets are frozen, the monetary supply does not flow. This creates an emergency situation where it is imperative that we restore the monetary flow.
In today's environment it is critical that we on an emergency basis thaw the financial markets thereby enabling the required monetary flow. There is not a lot of time to react. Waiting too long will create a severe recession or a depression.
- Jimbo
- 125 Comments
Sep 26 10:28 AM- robertsgt40
- 3 Comments
Sep 26 11:26 AM- xsuddensam
- 242 Comments
Sep 26 11:28 AM"It is obvious to most that when you arteries are clogged, the blood doesn't flow. When you have blocked arteries it is an emergency, and to avoid a heart attack it is critical to get the blood flowing, which implies the use of a stent or open heart surgery. A complete blockage will result in a heart attack or worse. Time is critical, and the required correction is an emergency. "
Nice analogy and a good try. However, if the patient keeps on eating at Berger King or McDonalds, the procedure is a waste of time and money.
Alleviating the blockage in the credit market by bailing out those who feasted on sub-slime mortgages and other fraudulent security schemes is not the answer. We will never have a healthy and sustainable economy until we change our belief that credit rather than productivity is required for growth and prosperity. As a society, we must change our way of thinking and become financially responsible both publicly and privately.
- o/w/s
- 13 Comments
Sep 26 11:35 AMWe no longer guillotine Royalty. But can we find a way to reduce their wealth? First a one-time progressive tax on total assets. Then more progressivity in the annual income tax. Remember the 1950's. The top bracket was 90% and this country's economy thrived. There was still plenty of motivation to work harder for the corner office, to be the leader. Even dogs have an alpha male.
- the social scientist.
- 15 Comments
Sep 26 11:45 AMI have seen no mention of Marx's crisis of capitalism. This is a theory, and therefore an explanation, which produces predictions. The main prediction, which caused the theory to fall into disfavor was he predicted the collapse of capitalism followed by revolution of the workers. It didn't happen in the 1930's when we had the last crisis of capitalism.
The theory is essentially quite simple. If the owners of capital don't pay their workers the fair rewards of their labor, then those workers won't be able to consume all of the production (unless you lend them the money - my addition). There is an oversupply of production. Profits then fall. The capitalists look for new profit opportunities, i.e. new markets and colonies, now called globalization. The same problems occur again. Marx never thought of raw material supplies being limited, but their scarcity is clearly adding to the cost of business and lowering profits also.
We were there in the 1930's, but there was no revolution. We are there again, and there will be no revolution, because most people, including me, are sheep. Don't separate from the mob, because you will be culled. How do you like that metaphor? Here's another, inspired by Mel Brook's History of the World - the meek shall inherit the earth - 6 feet under.
Another Depression, no matter what politicians do? Quite possible. Even if they make credit available again, those who can afford to borrow don't want to. The others who need credit can't borrow. It doesn't look good. Can China save the day? Probably not. I figured out long ago that if China and India were to emulate the western growth path, the world would quickly run into Malthusian supply constraints. If the world can resume economic growth oil prices will go through the roof. Although there are many alternatives to oil, none are cheaper than oil, and they are all take lots of capital and time to put in place. The capital is cheap, but there isn't much available. This paradox is about the only new thing under the sun in this situation.
We live in interesting times.
- Middle Class Father Wants Win/Win Deal
- 1 Comment
Sep 26 12:23 PMI wish the term "bailout" were not used so broadly for very differently structured plans and agreements. If the government were to simply give money to a company to prop up its balance sheet, clearly that is a bailout. Taking 79% of AIG with usurious financial terms where they looked like aggressive venture capitalists? Not a bailout. The $700 billion plan looks like it would be a budget to buy assets that over the long term have value but in the short term aren't trusted. The plan would take these assets at discount prices and at great cost to the rich shareholders of the companies, increase the liquidity of the financial system. This should not be termed a bailout. Would you call it a bailout if you had no money to buy groceries and pay your rent, and your friends wouldn't buy your second car, but then a used car dealer bought it from you for a song? Yes, the car dealer would be bailing you out of your situation, but he hadn't done so against his own interest.
It's absolutely true that without a financial deal to invigorate the balance sheets of the nation's financial anchors, the problem we'll have will hurt far more than the deal would.