New occasions teach new duties;
Time makes ancient good uncouth;
They must upward still, and onward,
who would keep abreast of Truth;
Lo, before us gleam her camp-fires!
we ourselves must Pilgrims be,
Launch our Mayflower, and steer boldly
through the desperate winter sea,
Nor attempt the Future`s portal
with the Past`s blood-rusted key.
" The Present Crisis"
James Russell Lowell
All of which is only presented to emphasize that you can’t win the new war with tactics developed during the last war and by extension it could well be foolish to think that doing the kind of things Roosevelt did in the 30’s will help us out of the current financial quagmire.
If you are still interested follow below the fold.
Indeed it is even well, especially on this particular day, to question whether what Roosevelt did in the 30’s really ended the Great Depression anyway.
As a living witness to the history of that time, I tell you that it was on this very same date in 1941 that the depression actually finally ended.
And it was what happened on that day that ended it not Roosevelt's alphabet soup of governmental projects.
And frankly even what worked in December of 1941 won’t work this time around either. There is simply no one left to fight that is big enough to galvanize the country into action.
In fact nothing will work, in my view, except something equally spectacular and that is to take banking out of the hands of private enterprise – at least for long enough to get the system moving again.
At the moment what we have been doing and what we are proposing to do, is not different in any significant way from what Roosevelt did.
You might call it spaghetti economics, Try everything and see what works – only nothing worked.
To be sure the guys in the CC camps were a little better off than the guys in the soup lines and the guys doing work on the Public Works Projects were also a little better off as well, but the fact remained that the mighty engines of capitalism that had shut down in October of 1929 were still silent in December of 1941 and only then did they spring back to life.
The proper way to solve a problem is to analyze it, find out what its root cause is, and then apply a solution that eliminates the cause.
In hindsight now it is pretty clear what caused this latest recession to occur.
In December of 2007, oil prices were 50% higher than they had been a year earlier.
At the same point in time the Banks stopped lending because they had gambled all their money on a sure thing called Credit Default Swaps and they had lost everything that they and their stock holders owned.
The upshot was that businesses that needed an extension of credit to handle the spike in oil prices, instead, had solid revolving lines of credit unceremoniously cut off for the simple reason that the banks were broke and even worse the banks were head over heels in debt - in fact technically bankrupt.
A Credit Default Swap is nothing more than an unregulated insurance policy written against the possibility something terrible might happen.
There is nothing wrong with them in theory.
They are just like Life insurance. If you die, your family suffers an enormous economic loss so you pay a tiny premium to a life insurance company to buy insurance against that event.
And if the banks had done that, they would have come out of the Sub Prime mess Trillion dollar winners.
But they didn’t buy them. They sold them. They sold them to make a few quick extra bucks, and like the Bookmaker’s runner pocketing bets that "couldn’t lose", they were in dire straits when the unthinkable happened.
And they deserve the same fate as that errant bet runner.
Instead we hand them trillions of dollars that future taxpayers haven’t even earned yet, and with unmitigated gall they then refuse to put that money back into play.
That leaves no other course of action that will lead to success.
It is quite simply time to take over the financial industry and use it to restart the economy.
Rebuilding infrastructure is fine. Finding alternative energy solutions is fine.
But these initiatives will not take off with the kind of energy needed to sustain them unless there is some underlying driving force and all history teaches us that the only such underlying force that can truly create the needed energy is the Profit Motive.
The American entrepreneurial spirit is alive and well everywhere but in the banking industry.
Americans are not unwilling to take risk for Profit. Banks are.
We should not punish the entire economy for the sins of the few - no matter how rich or influential they are.
Before anyone tries to take some of these last few words and use them against this proposal let me say it first.
The only thing that can save Capitalism now is a little dose of Socialism.
These are indeed desperate times and they call for bold action.
It will be a simple matter now to nationalize the banks when they are selling in the Penny Stock range and then when we re-privatize them a few years from now, the public should get enough money back to fund some other needed projects like universal health care and affordable quality education.
Except for a handful of rich and powerful people it is a pure "Win-Win" situation.
Real change is what we voted for and what we need, not incremental change, not the same old things with new acronyms.
Change We Can Believe In.