Rube Goldberg was famous for his hilarious, insanely complex, contraptions built to do simple things. Conventional economic wisdom seems of a piece: drop a bunch of money on bankers' heads, they will turn, processes set in motion... voila! a chain reaction. Eventually Trickling Upon the people at large. Like this:
You could, instead, just pour the damned beer.
Rube's machines worked, which is a big difference from the bailout so far. Now we have Economic High Priests prophesying that it will take up to $4 Trillion in giveaways and buyouts to restore confidence in the banking system. Almost everyone accepts that $2 Trillion, at least, will be needed.
Do we need this Rube Goldberg economic approach? Just take these 2 numbers: $4 trillion; 300 million. Now let's do the math:
$4 trillion, that is,
4,000,000,000,000
divided by the number of US citizens (rounded up)
300,000,000
equals about $13,300 per person, $53,200 for a household of four. You give no banker a penny, but you spread it out to the people ultimately responsible for backing the money.
Then here's what people can possibly do, and there are no alternatives:
- pay down debt
- spend it
- save it
(1) helps restore solvency to banks, relieves great distress for people, and frees them up for some more purchasing (hopefully not on credit cards). (2) stimulates the economy tremendously, creating jobs, and ultimately helps banks. (3) also, helps the banks with their solvency issues, and makes lending a viable option again. (And yes, they can bury it or burn it or use it for toilet paper, but... please.)
As one writer noted on the internet, it isn't just the amount of money that's available, there's also the velocity at which that money's circulates that is the difference between a good and bad economy.
When we gave the 1st part of TARP what happened was the bankers calculated they should siphon off some and sit on the rest. Why run that risk? Give it to the people and that money will be accelerating so fast the economy might have a chance for lift off. The Rube Goldbergesque/Trickle Upon model, to date, has dismally failed.
Why can't our politicians see this? Well, just today (Friday), I saw Sen. Kerry being interviewed by Andrea Mitchell (who did not do full disclosure), and there he was muttering about how very complicated the economic system is. And in a way he is right.
One of the hugely complicating factors is that almost everyone in Congress, especially people on finance-related Committees, have raked in hundreds of thousands of dollars over their careers. Naturally, our Representatives would brand themselves churls and ingrates if they didn't consider the interests of those who have invested so heavily in them.
Imagine, there you are at a cocktail party, and you see someone who has pushed $300,000 your way, and you haven't given them at least a 100 times return on investment? Now how complicated is that for you?
Go to opensecrets.org pick an industry, and then poke around to find such gems as:
and things like:
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But the fix is not only simple, it is just: If you plan to take the people's money, then give the money to the people. Not the banks.