I admit right up front I am not an economist of any sort, in fact, I'm lucky to balance my checkbook and make sure that all my bills get paid on time, but something about this whole $700 billion bailout just doesn't smell right. It hasn't smelled right from the beginning.
The whole timing of it, the amount, the chorus of "we didn't see it coming" along with Paulson's chronic flip-flopping in front of the Senate banking committee, it just didn't add up...I just had to find some answers that make sense to me...
So, where do I go to find out in simple terms "what is this really all about"...well of course, Uncle Ted's "series of tubes"
While out here in the "series of tubes" today I stumbled across two articles by Michael Hudson that explain in some detail what has been happening; not just in terms of the mortage melt-down sub-prime and otherwise...but also in the speculative derivatives market.
I have come to the conclusion, after reading these articles, that unless the bailout deal hammered out looks almost NOTHING like the Paulson proposal, what the result will be is:
- This bailout will not stop a credit collapse, it has been timed to take place next year, supposedly on Obama's watch.
From the article posted on Counterpunch.org dated September 8 where Mr. Hudson is discussing the FNMA/FDMC (Fannie Mae/Freddie Mac) bailout only :
The government’s auditors are now finding out that their other innovation was to cook the accounting books, Enron-style. As mortgage arrears and defaults mounted up, Fannie and Freddie did not mark down their mortgage holdings to realistic prices. They said they would do this in a year or so – by 2009, after the Bush Administration’s deregulators have left office. The idea was to blame it all on Obama when they finally failed.
(emphsis added, mine)
And
- The $700 billion bailout is just icing on the cake. From today (Thursday Sept 25) .article:
... No economy can grow at steady exponential rates; only debts can multiply in this way. That is why Mr. Paulson’s $700 billion giveaway to his Wall Street colleagues cannot work.
What it can do is provide a one-time transfer of wealth to insiders who already have been playing the debt-credit system and siphoning off its predatory financial proceeds to themselves. The Wall Street bankers, brokers and fund managers to whom I’ve been speaking for many decades all know this. That is why they pay themselves such large annual bonuses and large salaries each year. The idea is to take as much as you can. As the saying goes: "You only have to make a fortune once in a lifetime." They have been salting away their fortunes year after year, mainly in hard assets: real estate (free of mortgages), fine furniture, boats and trophy art. One last $700 billion heist and they can make their getaway.
Again, emphasis added is mine.
I think this drives home two points: one is that what Paulson really only wants is his basic plan delivered.
He has agreed to accept oversight, he has agreed to any number of things, as long as he gets his hands on the money...he squirmed and wiggled and almost turned himself inside out any time one of the Senators on the Banking committee suggested anything other than the basic tenants of his plan...which was: "give me the $700 billion or the economy will collapse." He opposed and more measured response, oh say in the amount of $150-$200 billion...saying it would do little to restore confidence...He resisted the loan option, he abhors the "capitalization" option (giving tax-payers stock in the companies being bailed out), laying out dire warnings of "this is what happened in Japan" raising the spectre of a ten-to-fifteen year stagnation.
The second point this drives home for me is that as far as the real power brokers are concerned, they want McCain to lose...if he wins, he, and the GOP will rightly inherit this mess. Which goes a long way towards explaining why the McPalin campaign seems to be so gimmicky and rife with obvious errors in judgement.