If you would like to add a comment to any of the threads here on AADB, registration with blogspot.com is not required. Simply click on the ‘comments’ link at the bottom of an essay, and either enter a nickname under ‘choose an identity’ or post your comment anonymously. Serious comments are always welcome.

REQUIEM

Below are the two final essays to be posted on Allegiance and Duty Betrayed. The first one is written by a friend -- screen name 'Euro-American Scum' -- who, over the past four years, has been the most faithful essayist here. He has written about everything from his pilgrimage to Normandy in 2004 to take part in the 60th–year commemoration of the invasion, to his memories of his tour in Vietnam. His dedication to America’s founding principles ... and those who have sacrificed to preserve them over the past 200+ years ... is unequaled. Thank you, E-A-S. It has been a privilege to include your writing here, and it is a privilege to call you my friend.

The second essay is my own farewell. And with it I thank all of the many regular visitors, and those who may have only dropped in occasionally, for coming here. I hope you learned something. I hope a seed or two was planted. But, even if not, I thank you for stopping by ... 25 March, 2010

9/19/2008

Personal Responsibility:
The Cornerstone of Liberty

UncleSam.jpg

The large majority of conservatives with whom I have spoken about the current economic crisis have voiced the opinion that the recent ‘remedies’, both proposed and undertaken, by the administration are unavoidable.

I must take issue with the idea that Bush – and Bernanke and Paulsen, and all of the other ‘players’ who have been involved in the nationalization of what was formerly private enterprise, and the taxpayer-funded bailout of major private institutions – is doing what needs to be done.

The reasons we are in this mess are several – the most blatant of which are:

    (1) ‘Special interests’ who have a focus on racial/low-income ‘quotas’ pressured congress to relax underwriting standards to the point where people’s ability to meet the requirements of a financial contract became all but irrelevant in the delivering of that contract.

    (2) Many of the checks and balances/regulations that have been a part of the free market system have been discarded, wholesale

    (3) Stemming from both of the above, financial gurus whose calling it is to make momentous decisions with other people’s money began to place more value on the money they themselves could make than they did on the well-being of those they represent.

    (4) Those whose charge it has been to oversee the banking/mortgage/investment/real estate industries too often cavalierly looked the other way when rules were being bent and broken.
Yet these kinds of conscienceless ‘faults’ have become a way of life in Washington, D.C., with the result being that the people, to put it simply, no longer matter.

The administration’s recent unprecedented moves (with more such travesties to come) in an effort to stave off a major economic calamity – both national and global – will, in the long run, do no such thing. I don’t believe there is an economist worth his salt who will agree that placing the gargantuan burden for (1) through (4) above on the backs of the American taxpayer (of both this and the next generation), while also ensuring a spiraling national debt, greater devaluing of the dollar, more inflation, and a deeper recession, will accomplish anything more than placing a band-aid on a wound that has pierced an artery.

From the grotesque burgeoning of the entitlement mentality (along with the coincidental inverse movement in the work ethic) ... to the refusal to punish those who enter our country illegally (in fact we reward them by providing a myriad of services, gratis, for which the law-abiding American citizen must pay) … to this most flagrant example of the responsible once again footing the bill for the fraudulent and the irresponsible ... and a myriad of other examples of societal decay sandwiched in between ... we have become a nation that no longer believes in personal responsibility, or justice for that matter.

Not only will these recent band-aids accomplish nothing economically/financially – neither will they alter the corrupt status quo one iota. In effect, they will serve to embolden the schemers.

If a child consistently behaves irresponsibly and arrogantly, and never pays a price, that child will never learn the meaning of responsible behavior. Especially if other children are constantly forced to reap the punishment that should have been meted out on the offender. It becomes nothing more than a sadistic game of sorts, with evil consistently triumphing over good.

I am certain that my views on this grave situation may seem astonishingly harsh to many (perhaps most) of the readers here. But, believing that nothing of any long-lasting positive significance will result from these grotesque government nationalizations of what used to be private enterprise, and economic bailouts, I believe that the only course of action that has any hope of resulting in a permanent, long-lasting ‘cure’ for the corruption and loss of moral compass that permeates virtually every corner of our government, and its special-interest puppet-masters, is to allow nature to take its course. To allow the rule-breakers to suffer the consequences of their actions. Finally.

Yes, the result could be a national, and global, catastrophe the likes of which we have not experienced in our lifetimes. But if that is what it requires for a return to sanity and a renewed reverence for personal responsibility (which, after all, is the cornerstone of any reasonable definition of human liberty), then so be it.

The current course correction will provide none of the desired outcomes. Not on a permanent, we’ve finally learned our lesson basis. In fact, it will solidify the status quo – and will dramatically ... negatively ... alter the lives of every American taxpayer, and his children, into the foreseeable future.

If there must be a (n economic) flood, of Biblical proportions, the excruciatingly painful cleansing that would result might just prove to be the painful lesson that sets America back in search of the Founders’ vision.

Nothing that is in the works, or on the table, at present even takes that magnificent vision into consideration.

Many here on AADB have been whispering for a long time the belief that a 'revolution' of sorts is the only thing that has any chance of setting our beloved republic back on the path that was blazed for us two-hundred-plus years ago. Perhaps the activism involved in such an undertaking has been removed from our grasp, and we are instead supposed to (somewhat passively) simply watch the corruptors finally receive the horrendous comeuppance that they deserve. That we must suffer along with them is terribly unfair and unfortunate. But sometimes a deep and essential cleansing demands such suffering, on the part of the innocent as well.

For those who marvel at our ability to stagger from crisis to crisis without experiencing a disaster and think we can continue indefinitely to overload our economic and social system with laws of plunder and legislative nonsense, I will remind you that the man who is guillotined is breathing right up to the moment the blade hits his neck ... John Galt

~ joanie

47 comments:

Anonymous said...

Clarity, thy name is Joanie!

Thank you.

daveburkett said...

Excellent, Joanie!

Have a good weekend. We all need one!

marcus aurelius said...

Powerful powerful powerful arguments to "let nature take its course." I am forced to agree.

smithy said...

Yes, there will be some painful adjustments. And yes, the financial sector will never be quite the same again, with a new mix of public and private sector emphasis. But the dustbin of history will just have to wait for the consignment that will someday follow communism--and it won't be American capitalism.

Wall Street Shudders (The financial sector will never be quite the same again)

clive said...

Yes, the result could be a national, and global, catastrophe the likes of which we have not experienced in our lifetimes. But if that is what it requires for a return to sanity and a renewed reverence for personal responsibility (which, after all, is the cornerstone of any reasonable definition of human liberty), then so be it.

To which I say a sad "Amen."

John Cooper said...

The Death of Fiscal Conservatism by Michelle Malkin
~~~~~
I have had it with Pollyanna conservatives who continue to parrot the “fundamentals of the market are great!” line.

The fundamentals of the market suck. The fundamentals of capitalism have been sabotaged.

Yes, yes, crony Democrats are to blame for much of how we got here. You don’t need to recite all the talking points back to me. I’ve been writing about the Fannie/Freddie debacle for years.

But it is September 19, 2008. And this is a Republican White House presiding over the Mother of All Bailouts. Every step along the way since stimuluspalooza began last summer, we’ve heard that every bailout step was just a one-off. Each step was supposed to calm the markets. Each new government intervention and allocation of taxpayer dollars was supposed to achieve “stability.” Each new package of goodies rewarding irresponsible behavior and bad financial decisions was supposed to prevent new ones.

None did. And now, here we are.

This is your Bush legacy — not Pelosi’s, not Reid’s, not Obama’s: A ginormous bailout of every last, failing, panicked financial institution’s illiquid assets that may reach into the trillions — TRILLIONS – when all is said and done.
~~~~~
People say that inflation is under control, but has anyone noticed that rather than talking about millions of dollars, we're now talking about billions and trillions.

How long before it's quadrillions?

john galt said...

Joanie, you have a unique knack of getting to the heart of any issue. I don't think there's a "pundit" alive who does it as well.

Thanks for quoting my namesake at the end. ;)

no_way_a_liberal said...

BINGO

Once again you tell it like it is.

So far the only good outcome is the stopping of short trading. The "shorters" were causing too much distortion in the market.

What we also need is to send these "crooks" that forced the banks to lend to people that had no business borrowing to jail. The others that bought those notes: to hell with them. Let them drown in their own stupidity.

Anonymous said...

WELL DONE!

Brad Zimmerman said...

Nothing that is in the works, or on the table, at present even takes that magnificent vision into consideration.

And nothing ever will, so long as we continue to let the "elite" chart our course.

A brilliant commentary Joanie.

John Cooper said...

Text of proposed bailout bill

Spending: $7,000,000,000

New debt ceiling: $11,315,000,000,000

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

Fascism is upon us.

charles fitzwater said...

I have nothing to add but applause.

Luis said...

I agree entirely Joanie. Well written as always.

While this has been a truly exceptional week, I do not see the wholesale nationalisation of many banks as either healthy or sustainable.

Clearly some big mistakes have been made in recent years. The way foward is to face up to these mistakes and take the pain now rather than continue to be bailed out until a far worse situation eventually has to be faced.

The "entitlement mentality" describes very well something that I am ever more aware of in Britain.

Anonymous said...

Thank you for this!

Smokin' Joe said...

Not only will these recent band-aids accomplish nothing economically/financially – neither will they alter the corrupt status quo one iota. In effect, they will serve to embolden the schemers.

I agree.

But, believing that nothing of any long-lasting positive significance will result from these grotesque government nationalizations of what used to be private enterprise, and economic bailouts, I believe that the only course of action that has any hope of resulting in a permanent, long-lasting ‘cure’ for the corruption and loss of moral compass that permeates virtually every corner of our government, and its special-interest puppet-masters, is to allow nature to take its course. To allow the rule-breakers to suffer the consequences of their actions.

We have not nationalized 'enterprise', but debt: failed enterprise, not the risk of a business starting out which may profit, but one which is far enough in the hole that no one would buy in.

We have taken from the poor to feed those who profited from running the mechanisms of the economy into the ground, at the behest of the robbing hoods of the Congress and other special interests.

I say other special interests because some members of the Congress have not been isolated from the results of their actions, receiving contributions and special loan rates others might not be able to receive on those same loans.

They have, in effect violated the public trust for personal gain, as well as political mileage.

But the other effect, to the glee of Socialists and Marxists paying sufficient attention, has been to effectively strip the middle class, the taxpayers of the "merchant class" of their assets, creating in effect a bimodal income distribution after taxes, of rich and poor, the latter either through lack of income or the loss of income to taxation, or loss of wealth through inflation resulting in 'normalized' bottom lines.

For those of us who chose to live within our means, to have the sheer audacity to not be heavily leveraged at the bank, the drubbing is additionally heinous in that we who live within our means must now pay for those who live beyond theirs (and ours, as well). That is obscene.

The dust has not settled yet, but if people had a mere inkling of how much this was going to cost them, they'd be clogging the streets of Washington, D.C. and finane centers with ropes and more in hand while they could still afford to go there to place 'ornaments' on lamp posts for the crows to peck at.

Whether or not we see meaningful reform, is another issue.

For starters, no 'business', once 'bailed out' should be able to make a political contribution again, ever. The CEOs and CFOs of such should be held liable and stripped of such profits they personally made in the perpetration of this disaster.

Banking rules should go back to the merits of the collateral and the payor of the loan, without race, etc. having anything to do with it. Departing from such rules got us here.

cw-patriot said...

Thanks for the link to the Weekly Standard article, smithy. It's excellent.

cw-patriot said...

Thanks for the Malkin article, John. She never pulls any punches, and quite often sees the writing on the wall long before the rest of us do.

cw-patriot said...

The way foward is to face up to these mistakes and take the pain now rather than continue to be bailed out until a far worse situation eventually has to be faced.

The "entitlement mentality" describes very well something that I am ever more aware of in Britain.


Excellent observations, Luis. As always, it's so nice to hear a voice of reason from across the pond. Such voices are becoming more rare over here, with the passage of time. :(

cw-patriot said...

For those of us who chose to live within our means, to have the sheer audacity to not be heavily leveraged at the bank, the drubbing is additionally heinous in that we who live within our means must now pay for those who live beyond theirs (and ours, as well). That is obscene.

Beautifully said.

Your suggested 'reforms' (that any business bailed out by the government would never be able to make political donations again, and punitive damages would be assessed the CEO and CFO of failed businesses, racial 'quotas'/considerations in financial contracts would be dumped, etc.) are excellent. But they stand a snowball's chance in hell of seeing the light of day. We're much too far down the socialist/elitist rule path for that -- especially considering the fact that, if these bailouts work temporarily, absolutely nothing will change, other than the occasional cosmetic 'remedy' to calm the masses.

Thanks for the very insightful comments!

~ joanie

John Cooper said...

Great post, Joe. Thanks.

What we have just witnessed is the left getting it's way by nationalizing a large piece of the American economy...

...and being able to blame the Republicans for it.

A Win-Win for the Democrats.

John Cooper said...

Now the U.S. taxpayer may be bailing out foreign banks, too.

Exclusive: Foreign banks may get help
~~~~~
Secretary Paulson: "If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution."

paul Nicholas said...

Ron Paul: This Bailout Won't Be the Last

John Cooper said...

I'm not a Ron Paul fan because of his irrational stance on foreign policy, but he's pretty smart when it comes to economics:
~~~~~
Before the Depression, [the government] generally allowed these kinds of problems to unwind. They were very severe. They would last six months or a year—a lot of liquidation of debt would be wiped off the books. And then it would go back to work again. What we've been doing now—especially since 1971—is preventing the real liquidation of the malinvestment and the excess of debt . . . If this process continues, we're going to own General Motors and Ford, then we will have to own the airlines. We are socializing our country without even a vote by the Congress. It's a horrible situation."

John Cooper said...

A book of interest: Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips, former Reagan strategist (who has since left the Republican party (bio)).
~~~~~
"...previous empires such a 17th century Spain, 18th century Holland, and the late 19th and early 20th century Britain all succumbed to financialization as their global power reached its peak. He argues the the United States is now in a similar position. In the last 30 years financial services have grown from 11% of GDP to 21%, and manufacturing has declined from 25% to 13%. A reversal of roles that Phillips sees as very unhealthy..."

"The conclusion of this volume is very gloomy. Phillips believes that we are at a pivotal moment in American history when the economy has been hollowed out, we are saddled with trillions of dollars of debt, and our political leaders are dishonest, incompetent, and negligent..."

cw-patriot said...

"...previous empires such a 17th century Spain, 18th century Holland, and the late 19th and early 20th century Britain all succumbed to financialization as their global power reached its peak. He argues the the United States is now in a similar position. In the last 30 years financial services have grown from 11% of GDP to 21%, and manufacturing has declined from 25% to 13%. A reversal of roles that Phillips sees as very unhealthy..."

Beautiful.

We are a nation of paper-pushers: We trade paper, give advice, hold seminars, and schedule.

When it comes to the producing of the nuts-and-bolts required to remain a free society, and to beat back the enemy at the gate, we're losing the ability to do that more and more every day.

Add to that suicidal fact the self-serving corruption mentioned in your last paragraph and it appears that we're voluntarily writing our own epitaph.

~ joanie

cw-patriot said...

Paul, I adored Ron Paul until this past year or so when he began voicing the opinion that we should not be fighting wars on foreign soil, even if it means preventing those wars from being fought on our own soil.

But, putting that enormous issue aside, in most, if not all, other areas I think Paul is brilliant.

Thanks for the link. It represents Paul at his best.

Here's one of his masterpieces of oratory:

A Republic, If You Can Keep It

John Cooper said...

Speaking of Ron Paul, I just discovered that he offered an amendment to H.R. 1461 - the 2005 Federal Enterprise Regulatory Act "...to eliminate the ability of Fannie Mae, Freddie Mac, and the Federal Home Loan Bank Board, to borrow from the Treasury".

This was on October 26th, 2005. A man ahead of his time.

Angelo Miozza said...

I have been following the Fannie/Freddie situation for a number of years now. They have one of the strongest lobbies in Washington (until the recent bailout provision that makes them stop lobbying….we will see).
If a Congressperson or Senator opposed them they would run adds in his or her district accusing the politician of being against affordable housing. It was very effective.
A former Fannie executive was on Obama’s VP search committee. What I did not know was Obama’s deep involvement that made him the second highest recipient of contributions. Dodd being number one did not surprise me.
I am not convinced Obama understands financial issues. He seems only to be focused on redistributing the nation’s wealth in favor of helping the poor by taking from everyone else. I do not believe he cares nor understands how that can kill wealth creation in this country.
Paul Krugman, the liberal economist who writes for the NYT, admitted that taxing the rich will not give the federal government enough money to carry out the current liberal social agenda.
Yes we have heard from the liberal news media and they may very well get their way this November. But I am reminded of Richard Nixon’s silent majority. We will again hear from the silent majority the first Tuesday in November.
The bottom line: I think the American people are frustrated with all the politicians, including the do nothing democratic congress. In times like this they often vote for divided government. That might add up to one party keeping Congress and the other taking the White House.

claude peiffer said...

Amazing about the Paul amendment, Cooper. He has more integrity in his little finger than Obama has in his whole entourage of mentors and advisors.

claude peiffer said...

Paul Krugman, the liberal economist who writes for the NYT, admitted that taxing the rich will not give the federal government enough money to carry out the current liberal social agenda.

I watched McCain and Obama on Sixty Minutes last night. Obama went on and on about all of the programs he wants to put in place- including his infamous national healthcare program that will mean the death of us all- and he claimed that a small tax increase for those making above $250,000 and a "tax cut" for everyone making under $100,000 would take care of the financing for all of his socialist programs.

He must have some kind of magic wand.

I hope your optimism about the election results is well founded, anonymous. If the Democrats take both the White House and Congress I don't think America can survive even 4 years under such leadership.

john galt said...

Angelo Miozza-

I have been following the Fannie/Freddie situation for a number of years now. They have one of the strongest lobbies in Washington (until the recent bailout provision that makes them stop lobbying….we will see).
If a Congressperson or Senator opposed them they would run adds in his or her district accusing the politician of being against affordable housing. It was very effective.


Hmmm, it seems to me that this should be headline news. But, like most news stories that implicate the Washington establishment, the average American isn't going to hear about any of this.

Paul Krugman, the liberal economist who writes for the NYT, admitted that taxing the rich will not give the federal government enough money to carry out the current liberal social agenda.

While we're on the subject of Paul Krugman, he had a great op-ed piece yesterday in the NYT that's worth reading in its entirety.

An excerpt:

I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.

Anonymous said...

http://www.youtube.com/watch?v=3AJqESdw7xs

Brent Rosen said...

Angelo Miozza said:

I am not convinced Obama understands financial issues. He seems only to be focused on redistributing the nation’s wealth in favor of helping the poor by taking from everyone else. I do not believe he cares nor understands how that can kill wealth creation in this country.

Not only that but redistribution of wealth is one of the basic tenets of socialist doctrine. What he wants to do is completely against the kind of government based on individual freedom that our founders established.

John Cooper said...

Angelo Miozza: Any relation to Angelo Mozilla of Countrywide? (grin)

Seriously, good post. Thanks.

In breaking news, Chris Dodd's mashup of this bill contains the following language in (appropriately named) Section 8:
~~~~~
Any determination of the Secretary with regard to any particular troubled asset pursuant to this Act shall be final, and shall not be set aside unless such determination is found to be arbitrary, capricious, an abuse of discretion, or not in accordance with the law.

3timesalady said...

Any determination of the Secretary with regard to any particular troubled asset pursuant to this Act shall be final, and shall not be set aside unless such determination is found to be arbitrary, capricious, an abuse of discretion, or not in accordance with the law.

I have NEVER heard of such unbridled power being granted to an unelected official! This is ludicrous!

Anonymous said...

Most Americans, and the media (it goes without saying) are ignoring three of the biggest contributors to the mess we are in:

1. The creation of a US central bank in 1913, which was and still is unconstitutional.

2. Nixon's repeal of the Bretton Woods agreement in 1971.

3. Clinton granting MFN (Most Favored Nation) status to China in the 90's, contributing more than anything else to today's huge trade deficit.

Angelo MIozza said...

Sorry John Cooper no relationship to Mozilla, lol.


john galt I read Paul Krugman's piece in the NYT dated 9-21. It is a good piece. I do find myself agreeing with him from time to time.

LouBarakos said...

$1.8 Trillion Dollar Bailout: Where's the Money Going?

Proudpodunknative said...

Michelle Malkin today:

Why Henry Paulson Must Be Contained

Both parties in Washington are about to screw us over on an unprecedented scale. They are threatening us with fiscal apocalypse if we don’t fork over $700 billion to Treasury Secretary Henry Paulson and allow him to dole it out to whomever he chooses in whatever amount he chooses — without public input or recourse. They are rushing like mad to cram this Mother of All Bailouts down our throats in the next 72-96 hours....

THIS IS AN OUTRAGE!!!!!!!!

danthemangottschall said...

Henry Paulson's opinion of the subprime mortgage crisis in April 2007:

We’ve clearly had a big correction in the housing market. Retail housing was growing for some time at a level that was not sustainable.

I don’t see [subprime mortgage market troubles] imposing a serious problem. I think it’s going to be largely contained.


And this is the man we're going to hand a blank check and free rein to oversee this bailout. Unbelievable! The inmates are running the asylum.

smithy said...

GOT GOLD????????????

cw-patriot said...

'Anonymous' said:

Most Americans, and the media (it goes without saying) are ignoring three of the biggest contributors to the mess we are in:

1. The creation of a US central bank in 1913, which was and still is unconstitutional.

2. Nixon's repeal of the Bretton Woods agreement in 1971.

3. Clinton granting MFN (Most Favored Nation) status to China in the 90's, contributing more than anything else to today's huge trade deficit.


Bravo! 'Anonymous', I wish you had put your name down here so I could send you a cigar!

I’ve written probably the equivalent of a (short, disorganized :) book here, and elsewhere, over the past couple of years on the current state of the American economy, and my own personal view of the economic future of our republic. I won’t repeat much of it here. Just a few simplistic, disjointed thoughts.

The Bretton Woods Agreement in 1944 as good as defined the US dollar as being the equivalent of gold ... and it made perfect sense at the time. There was a literal mountain of gold backing the dollar, and gold/dollar transactions were commonplace.

Since the dollar became the world’s currency (and was literally considered as good as gold), using the dollar to settle balances of payment became much more convenient than transferring large amounts of gold bullion or coins between governments. Trouble is, over the past sixty years, this reliance on the dollar has caused governments throughout the world to believe that they no longer have to store sufficient gold in order to back their own currencies.

This dangerous philosophy worked fine as long as the US had gold stockpiles plentiful enough to back its dollar, and as long as America enjoyed a surplus balance of payments -- which means that Bretton Woods, and the resulting change in global monetary/trade policy, worked just fine for all of about ten to fifteen years.

Enter the new -- faulty, and fiscally deadly -- American belief that paper money has its own intrinsic value, and that a healthy balance of payments surplus is nothing more than an economic luxury.

In the fifties and sixties, when other nations (European especially, and France in particular) began to comprehend that the dollar’s integrity was no longer as stable as it once was, they began trading in their surplus of dollars (the result of our growing trade imbalance with them) for gold, and the gold stockpile that America originally boasted in order to back its own currency began to shrink dramatically.

In the early seventies, Nixon, realizing that America’s gold reserves were fast depleting, cut the tie between gold and the dollar – essentially abandoning the foundations of Bretton Woods for good. By severing the dollar from its gold backing, Nixon effectively announced to the world that the reliability of the dollar from that day forth rested solely on the integrity, and willingness to honor its commitments, of the American government (how’s that for an oxymoronic concept?)

Fast forward thirty years from Nixon’s fateful decision, and reflect back on the last sixty, post-Bretton Woods ...

A few seemingly disjointed connect-the-dots comments and questions. I connect the dots in my own way. Others come up with an entirely different resulting pattern. So I’ll just throw out a few (what I believe are) immutable facts – surprising in their simplicity -- and leave them sitting there, for whatever they may be worth in drawing conclusions (or not).

Facts/comments:

At the time of Bretton Woods, the US economy was roughly fifty percent of world GNP. Now it is barely twenty.

US debt is now approximately 67% of GDP. Even more frightening is that the rate of growth of our debt is significantly larger than the rate of growth of our GDP.

For the first time in history, foreigners are doing most of the financing of US debt. Related question: How much longer will they be willing to accept the US dollar? More frightening question:

What happens when they stop doing so? When it no longer profits China to hold U.S. dollars and U.S. paper, will she continue to do so out of respect/admiration for, or a sense of moral indebtedness to, the US (please contain your laughter)? If not, what happens to the US economy?

For now, China has to play along with our currency war and hold the value of her currency down by buying dollar assets. She is reaping factories and jobs. Once she abandons the pro-dollar policy, we will simply be left with massive debts and an almost worthless dollar for a currency.

The Fed is forever creating money based on assets it does not have, and charging interest on those non-existent assets. Said differently: It is stealing the wealth of this nation. But the Fed’s Ponzi scheme will collapse under its own weight when it can find no more (especially international) investors to assume its debt.

Currency debasement can help a nation’s balance of payments in the short term, but history is replete with examples of permanent damage caused by governments who deliberately devalue their currency. Historically, monetary debasement has been the precursor to a civilization’s loss of political/economic power.

The future of credit as payment for anything is precarious at best, because there is simply too much credit (personal, business, and government) that is created out of thin air, with little or no tangible asset collateral.

Economics based on illusion is not economics at all, but deadly, escapist wishful thinking.

If the global credit system implodes, the world will turn to tangibles. After all, paper is only worth what one believes its future portends. A check from a rich man and a check from a homeless person can have the same amount printed on it, but who would value both of them equally? However, if the homeless man offers you gold (or another tangible commodity), how would your view of your two debtors change?

A couple of pertinent, timeless quotes:

The real menace of our republic is the invisible government, which, like a giant octopus, sprawls its slimy length over our city, state and nation. At the head is a small group of banking houses generally referred to as international bankers. This little coterie of powerful international bankers virtually runs our government for their own selfish ends. ... NYC Mayor John F. Hylan,1922.

If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered ... Thomas Jefferson.

Over the years, in conversations with people on the local level, and in conversations with others from other parts of the state and country, I believe I have planted seeds in a few minds. But I have also noted definite tendencies in some of those who choose not to believe that which I believe.

Government defenders often refer to a skeptic as an extremist or reactionary, and they urge the embracing of more reasonable explanations of unreasonable events.

I have never felt more pessimistic about the economic (and therefore political/security) future of our republic. The fact that behind-the-scenes bankers, monetary policymakers, and power brokers have surreptitiously called the shots for decades used to keep me awake at night. It no longer does.

It is an unfortunate fact of life that I, personally, now accept as such. But that doesn’t mean that we shouldn’t continue to try to do what is within our power to change that state of affairs – even if what is within our power finds itself daily more limited by those same powers that be.

~joanie

lori_gmeiner said...

Thanks for the excellent analysis Joanie.

As for this bailout program, it sounds like the overseeing of the entire crisis would be handed over to Paulson, an unelected person with no oversight, no accountability, no recourse, etc. What ever happened to the U.S. Constitution? Will somebody please go find it!

Anonymous said...

It’s amazing just how secretive this whole matter has become within the administration and the halls of congress. When it’s all over, I hope that there’ll be a few of both sides behind bars and the stockholders will have appropriately taken responsibility for their own investments. I don’t give a damn about any of them and if it brings on worldwide suffering, we’ll survive and be better for it.

cw-patriot said...

Excellent comments, Angelo.

Especially: If a Congressperson or Senator opposed them they would run adds in his or her district accusing the politician of being against affordable housing.

I was not aware of that -- although I suppose that anyone who is familiar with the often strong-arm tactics of lobbyists wouldn't be surprised at all.

~ joanie

radchemer said...

The plan puts taxpayers at a substantially greater risk than a true auction system. Buying these toxic assets inexpensively gives the Treasury a chance to profit from its risk if the paper appreciates in value over time, providing taxpayers some "upside" . The more that assets appreciate, the better the chance that the American public's long-term liability is low.

What has become clear is that Treasury plans to purchase bad assets from banks at prices very near their original value. The risk to taxpayers under this program would be tremendous. If housing prices continue to fall, so will the value of the paper the government has purchased. Under this set of circumstances the public could be at risk for underwriting the great majority of the Treasury's purchases and never having a chance to recoup their investment.

Buying troubled bank assets at above where they would be valued in a free market now and at a price which is near to the potential price when they mature is a great handout to the banks but undermines almost any chance that the Treasury will ever get any meaningful yield from the bailout.

Taxpayers lose any chance of being made whole

John Cooper said...

Here's the statement of the Communist Party USA on the financial crisis.

Save Main Street Not Wall Street!


The Bush Administration has proposed a massive bailout plan of at least $700 billion (maybe as much as $1.7 trillion) to stabilize the financial system amid the biggest economic crisis since the Great Depression. Treasury Secretary Henry Paulson, a Bush appointee, and the President are pushing for the U.S. Congress to rapidly pass the plan this week with little debate and no amendments. The rightwing and the banks want a plan that gives a blank check to Wall Street with no oversight.
(snip)
Any plan before Congress must:

1) Protect homeowners faced with foreclosure by restructuring mortgage rates to be in line with family income.
2) Create economic stimulus for working people and small business
3) Provide $100 billion in emergency relief to state and local governments wracked with budget cuts and diminished tax revenue
4) Bar CEO severance packages and cap the pay of executives receiving a bailout
5) Regulate banking and finance with transparent public oversight
6) Maintain public control over monopolies like Fannie Mae and Freddie Mac that have a decisive role in the economy
7) Control speculation and increase revenues by taxing large financial transactions
8) Ban predatory lending and cap interest rates on all types of debts
9) End the war in Iraq, which is draining $700 million a day from public coffers
~~~~~
I'm sure it's just a coincidence that this is identical to the Democratic party plan...