I know most here are feeling hopeful today after Obama's big speech. It was a good speech, the best Presidential address this country has seen in a lot of years. But don't think that means that a recovery of any type is around the corner.
It isn't. It is simply not mathematically possible.
The very simple reason is that the Gov't is operating on a faulty premise, that being that this country can (through some type of targeted stimulus spending) reignite economic growth and cause asset prices (stocks, real estate, ect...) to recover.
The incomes, corporate profits, consumption levels, and home and equity prices of 2005-2006 were based on a lie and massive amounts of institutionalized fraud. The only way to recover those levels would be a return to that fraud which would enable lenders to lend to people who don't have any way possible to pay it back. This fraud was pervasive across every level, from the borrower who lied about income, to the lender who allowed his underwriting to lax, to the securitization level as they packaged up crap paper and sold it off all over the world, to the ratings agencies who blessed future defaults with the vaunted triple "A".
This model and this level of fraud served to prop up home prices, consumption levels and corporate profits. Absent this fraud our economy would be much smaller, our homes would be much cheaper and our stock market would be much lower (all of which, despite massive Gov't intervention is correcting and will continue to correct until consumption and debt levels get down to a level which can be sustained with our ever shrinking real incomes).
And even if they were somehow by some miracle able to reignite growth for a year or two it would only lead to an even bigger collapse after that as it would simply create even more bad debt. We are literally following policies today that will make the next year or two look slightly better than they would otherwise (they will still look terrible) but that will condemn us to suffer much more than we would otherwise over the next 5-10 years and beyond. Look to Japan for the best case scenario of what we are facing.
No matter what program, bailout, or stimulus our Gov't enacts (and trust me there will be plenty)it amounts to throwing good money after bad in a vain attempt to backfill holes from already incurred losses.
I am sorry, but throwing the wealth of a generation down a hole to cover the bad bets of a bunch of banksters to protect that same group of banksters from having to feel the pain of thier bets is not a recipe for long term prosperity no matter how you present this plan. And it is not a plan that is friendly to the poor and middle classes of this country no matter how insistently or persuasively this case is made.
I know many here believe that Obama is "for the people" and his words would certainly suggest that but his actions tell a different story. If he was for the people his administration would not have just committed to propping up bankrupt banks with unlimited amounts of taxpayer money. That is as much counter to the interests of the common man as the worst of anything that ever came out of the bush administration (who I fervently believe was hands down the worst in American history).
By committing to bail out failed banks at all costs, (which is nothing but more of the same wealth transfers from the poor and middle to the filthy rich) the Obama administration will end up funneling as much or more money to the financial elite at the expense of the middle class than the last administration did. Unless that course of action is changed, mark my words, we are in the process of playing witness to the biggest theft of taxpayer money ever seen in the history of the world.
Obama talks about arriving at a day of reckoning but for whom? Who is going to have to bear the pain of the massive misallocation of captial that this country has engaged in over the last 30 years? The day of reckoning certainly hasn't arrived if your a failed bank....or a failed insurance company....or a failed automaker. Based on the plans put forth by this administration I don't see where there is any sacrifice called for by anyone. We apparently can magically just borrow money from the chinese to prop up our economy and ignite a "recovery" so that everyone can continue to consume beyond our collective means and the banks can be saved and bondholders can be made whole. Where is the shared sacrifice? The only ones I see taking any loss are you and me as we serve as the patsy for the bad bets of the elites.
Where are the tough decisions that are being talked about in that scenario? I must be missing something because that sounds like the same shortsighted, kick the can down the road, pleasure today at the expense of even more pain tomorrow (as the plan is not sustainable) kind of thinking that this countries "leaders" have engaged in since at least Reagan. How is a "lets borrow whatever we need to temporarily prop up our overconsumption and bail everybody out for bad bets they have made" policy one that can in any way be described as facing our problems and making the hard decisions that are required like Obama talks about?
The banksters wanted to get thier greedy hooks onto our social security monies and couldn't......most here were adamantly against that (rightly so) and that is when we thought the banks and our financial system were solvent. Why then (and what is the difference - trillions of Social Security money vs. trillions of taxpayer money) do so many here support throwing trillions of taxpayer money at banks that we now know to be insolvent? In what world does that make any sense.
I know this diary won't be popular and I am OK with that. But I just hope that there is enough people in this country that are not political ideolouges that will stop and think. I spent the last 8 years dealing with right wing leaning family members who I saw filter everything george bush did through thier ideological filter. Even after it became apparent that he was a massive fail they continued to support him by engaging in increasingly embarrasing and tortuous twists in logic. It was painful to watch. I was an active participant here because this seemed like the one place where common sense and rationality ruled the day. I think it still does but I am seeing some blindness based on ideology. Not everything is a good idea just because it is proposed by a Democratic President. A lot of what is going now is being sold as a Progressive solution but it is anything but.