I’m no economist, much less a banker, but the sums of money being thrown at the “liquidity crisis” in the banking sector look pretty scary to me. $200 Billion dollars in one go just recently. That’s a lot of liquidity.
Meanwhile Bush says that the housing market meltdown was caused by too many houses being built. Tell that to the people made homeless by foreclosures on their Mortgages and who are now living in tent cities throughout the land. Surely the real “liquidity crisis” is with the 99.9% of the population who have seen no real increases in their wages over the past 30 years, and many of whom have seen their real living standards decline?
$200 Billion dollars spread over a million homeless people would buy every one a $200,000 dollar house – support the construction industry and help to create a much more stable housing market. But somehow it seems to be morally wrong to give money to the poor whilst there is no moral hazard in giving the same money to the rich bankers who helped to impoverish the poor in the first place.
But what I find really galling is that none of the Presidential candidates appears to be able to say so. You would have thought that promising $200 Billion in housing, health, welfare, and education services available to all would make for a pretty good vote catching platform, not to mention the huge boost it would provide to the American economy.
But somehow that would be irresponsible, it would be inflationary, it would be socialism, it would create a “nanny state”, it would interfere with people’s freedom, it would undermine the work ethic etc. etc. etc.
Funny how the same money given to the rich – who have walked off with all the profits in the good times – seems to have none of the above deleterious effects on their moral character nor on the welfare of the nation.
So why are none of the candidates raising this issue? All seem to have been fulsome in their praise of Bernanke’s handling of the crisis. None seem to have a problem with the huge sums of money involved, not to mention the risk guarantees provided to JP Morgan to take over Bear Sterns for a song.
Maybe I have gotten this all wrong, and we are really talking about “funny money” here – the Central bank just printing more Dollar notes to free up the credit markets and provide much needed credit funding for productive enterprises in the real economy. If it were simply a case of short term loans which will be repaid in due course, perhaps I could buy that scenario.
But risk is risk, and the US taxpayer seems to be carrying the can. If you do happen to be in the unfortunate position of requiring a sub-prime mortgage to fund your home you will certainly know all about it. You will be paying penal rates of interest and the threats of legal action won’t be long in coming if you fall behind on your payments.
So why doesn’t the state simply nationalise those banks which have been irresponsible in their lending practices – much like the loan sharks were put out of business? Why shouldn’t the bankers and their shareholders carry the full consequences of their profligacy – much like the irresponsible home owner who can’t make the mortgage repayments because he has gambled his money away?
If you object to the state running banks as a matter of principle or ideology, they can always be sold back to investors when the situation has stabilised. If the taxpayer has shouldered the risk, surely he should also be able to profit from the sale of those banks back into a healthier market? This is what seems to have happened in Sweden in the 1990’s when they had a similar banking crisis.
But surely the biggest lessons of all should have been learned after the Great Depression when Roosevelt’s New Deal rescued the US from the robber barons and speculators who had run the country into the ground?
And yet the candidates don’t seem to invoke his memory all that often. Have the American people forgotten? Do they not realise what it took to fix the country last time around. Are the candidates correctly judging the mood of the electorate when they rule out such a Rooseveltian discourse as part of their campaign strategy?
If so, the American people only have themselves to blame. They have been taken for a monumental ride and seem to glory in being taken for fools. Obama has just spoken very movingly on the race issue, but is that what US politics is still really all about? Can you still be disqualified from mainstream discourse if you advocate an end to public squalor and private wealth?
I’m sure McCain is a very fine man. But he hasn’t distanced himself in any meaningful way from the economic policies which have driven the US to the brink of bankruptcy. Bush inherited record surpluses from Clinton and in a few short years squandered the lot. Now America may never again achieve the economic ascendancy it enjoyed at the turn of the millennium. Empires rise and fall but are the American people still being bought off with bread and circuses whilst Nero fiddles, and Rome burns?
It is difficult to see how any serious politician could be elected to power in any major European Country with such a blatant disregard for economic performance and social justice. Berlusconi, Aznar, and Blair, had their moments, but none have impoverished their nations in the way Bush has done.
That any Republican, no matter how heroic, could still be running neck and neck with the leading Democrat contenders is a matter for shock and awe. It is not about McCain personally, but about the people who are funding his candidacy, and who will be running his administration should he be elected.
Even Clinton and Obama don’t appear to be proposing radically different economic programmes. The issues are about gender and race, about values and patriotism, about national security and foreign policy, about globalisation and the effects of free trade.
But why is no one challenging the hand-outs to the rich? The hugely inflationary policies which will destroy the American economy and cost the dollar its preeminent position in the world? Do Americans not know that the wealthy are taking their wealth elsewhere? That they are being treated like the citizens of a banana republic/dictatorship with no more control over their own destiny than the average peasant whose land has been stolen for “development?”
Money spent on bail-outs for bankers and tax cuts for the rich can just as well be spirited abroad or spent on conspicuous consumption on largely imported products. Money spent on housing, health and education creates good jobs and retains that wealth within the country. Ultimately it increases the productive capacity of the nation.
The American people are conniving in the underdevelopment of their own country. The means their masters have used to undermine and under-develop many third world countries are now being turned on their own people. The world has learned the lessons of imperialism. It seems the American people have some catching up to do.
