I hereby propose a $300,000,000,000,000 bailout. Let’s not waste time bickering over what’s necessary and what’s fair. Lots of people are having financial troubles, but with a wave of Congress’ magic wand, we can have utopia on earth. FULL ARTICLE
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From one of my favorite books, Economics in One Lesson:
In a free economy, in which wages, costs and prices are left to the free play of the competitive market, the prospect of profits decides what articles will be made, and in what quantities—and what articles will not be made at all. If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself.
One function of profits, in brief, is to guide and channel the factors of production so as to apportion the relative output of thousands of different commodities in accordance with demand. No bureaucrat, no matter how brilliant, can solve this problem arbitrarily. Free prices and free profits will maximize production and relieve shortages quicker than any other system. Arbitrarily fixed prices and arbitrarily limited profits can only prolong shortages and reduce production and employment.
The function of profits, finally, is to put constant and unremitting pressure on the head of every competitive business to introduce further economies and efficiencies, no matter to what stage these may already have been brought. In good times he does this to increase his profits further, in normal times he does it to keep ahead of his competitors, in bad times he may have to do it to survive at all. For profits may not only go to zero, they may quickly turn into losses; and a man will put forth greater efforts to save himself from ruin than he will merely to improve his position.
I really like the list of questions in this article. Common sense stuff. I wonder what kind of answers would be given by bailout supporters. Probably things like, “Yeah sure, but THIS is different!”
If “freedom” naturally discards stupid ideas, we are not free, as we certainly have had a lot of stupid ideas dumped on us.
The “free market” being one of them. Markets are made by men and controlled by them for their own profit. The real term for “free market” is “oligopoly” The real term for the U.S. economy is “oligarchy”. The only “freedom” that exists is the “freedom” of the corporation to do exactly as it wants to.
The idea that government is inherently bad, is another of those ideas. The current economic mess is an excellent example. Less government involvement has given way to more corporate invervention and dominance of our lives. We now have corporations sucking the life blood out of us. Corporations have ruined our economy and our lives more so than anything the government has ever done. We have become a government “of, for and by the corporation”, instead a government “of,for and by the people. No successful society is entirely “free”. There will always be someone telling us what to do. After the events of the past few years, I’m convinced the corporations can screw it up worse than the government. Talk about clueless people!! Milton Freidman is dead and “free market economics” can be buried right along with him.
Would a continuation of what got us to where we are fix everything? That is the insanity of doing something over and over with the expectation that it will turn out differently. Only Angels could make capitalism work for a while, but even they would eventuall be forced into corruption by the inherent nature of the system, because there is no place in Capitalism for empathy.
Larken Rose’s article “The Mother of All Bailouts”seems to take any good idea that may help the middle class and help to fix the economy and twists it into ridicule. Let’s not forget that it was eight years of George Bush, Dick Cheney and the Republican Party that caused this disaster. Perhaps Rose should run as a Republican!
This is the poorest example of intelligence I have seen in a long time.
Plato struggled to apply reason and prudence to the solution of man. We must try and solve the political conflict and economic tension that we are living with today.
The American Recovery Act will:
help our schools
help the unemployed
create clean energy
create a middle class tax cut
create more health care
Larken Rose tries to deceive the citizens and erode public trust with his misplaced words.
My concern is the duty that is connected with social obligation.
This is about as silly a blog as I have ever read. More bullshit and wringing of hands. Where’s the REAL solutions? Why are people so into the immediate fix-it solution, when it’s taken 8 years to destroy this country as thoroughly as it has? When this group, along with other groups, comes up with viable, alternative solutions, I’ll pay more attention to them. But until then, I just see a bunch of cry-babies and whiners.
Something becomes valuable through the amount of work required to produce it. Wealth can be anything. It’s a state of mind. What’s worth more? A healthy ecosystem or a humvee? A yacht or a healthy body? We have been programmed from birth to equate accumulating stuff with being wealthy. We can’t help it. If we don’t buy something we don’t feel right. Remember that scene in Conspiracy Theory? Where he has to buy a copy of that book and he doesn’t know why?
Turn away from “stuff”. Start a vegetable garden. Buy locally. And for God’s sake, stop watching TV.
There’s plenty of ignorance about economics here, just as the author has stated. He asks some simple questions – and those that seem to want the bailout only get angry, call him a republican, or just repeat the mantra that the bailout is going to help people.
Bryan makes the best statement of all:
“If “freedom” naturally discards stupid ideas, we are not free, as we certainly have had a lot of stupid ideas dumped on us.”
He’s absolutely right – we’ve had stupid ideas dumped on us, but he’s way off base in thinking this was just over the last eight years.
Corporations are far from innocent in this mess, and so are individual people, as they have taken on way too much debt too.
but no one seems to answer the important question – where does the bailout money come from?
#7 repeats the same idiotic nonsense again. 8 years of Bush got us in this mess. Bush is a criminal, ran up massive debts, violated liberties, waged awful wars, and on and on and on.
But to think that Bush is the only reason we’re facing the huge crash that’s coming our way is either a complete partisan lie, or totally ignorant. I’m hoping it’s the latter.
How does printing up a bunch of new money to pay for stuff we can’t afford help the middle class? End result of all these fascist bailouts from the Bush/Obama years are going to be an even worse off middle class.
And watch these people come back and say we’ve still had too much freedom. Maybe the government should own everything!
The financial crises was created by the government. By relaxing all the restrictions on loans, and encouraging lenders to lend to anyone with a pulse. And lets not forget what role the Federal Reserves played with the artificially low interest rates that added even more fuel to the the fire.
People should be demanding an explanation from the government for purposely creating this crises!
Williamson, some really good points. I’m all for some regulation – how about we regulate the secret federal reserve?
Understanding the cause is essential for understanding the cure. Central banking, fiat paper money, and loose lending standards are the key players. Guess the proponents of the bailouts just want more of the same.
Or, they opposed bailouts under a “republican” but love them under a “democrat” Partisan hacks.
I really don’t think all the free give aways is neccessary , how about we just have a congress and govt that oes its job for the “people” !! what happened to making decisions baed on that and not paid lobbyist ? how about not having NAGTA , CAFTA , FREE TRADE , BANGSTER BAILOUTS , ETC . How about we quit relecting the same repretatives that DON’T represent us ? How about we have a living wage not a minimum wage , how about we get rid of OUTSOURCING ? HOW ABOUT WE SEND THE ILLEGALS BACK THAT GIVE 85 BILLION DOLLARS A YEAR TO THEIR HOME COUNTRY MEXICO IN REMITTANCES ? put that money back into our econmy instead of another countries pockets ? HOW about we have health care for americans that eliminates the insurance companies ? health care is a right not a privilege ! don’t need to add healthcare in on a vehicle or other product when sold . How about getting rid of the bets democracy money can buy period ? THIS ECONOMIC AND FINANCIAL CRASHE didn’t have to happen , washington is not and has not been doing their job that is what happened here, a few subprime loans DIDNOT BRING THIS COUNTRY TO ITS KNEES THIS GOVT DID BY ITS COMPLACENCY , LIES , THEIVES AND CORRUPTION AND UNITL WE THE PEOPLE DECIDE TO DO SOMETHING ABOUT IT , WE ARE GOING TO CONTINUE TO BE RAPED BY OUR OWN GOVT.
As mentioned above, if not having enough dollars is the problem, why not have the government give each person a million bucks? Would that fix everything?
No, because by simply increasing the number of dollars, you decrease the inherent value of each individual dollar. The dollar is not wealth, it is a tool for moving wealth. *Work* creates new wealth.
If increasing spending fixes an economy, how about if we all stand in a long line, and everyone hand $20 to the person next to them? How about $1,000? Would that fix everything? (Or, if gifts aren’t good enough, everyone could buy his neighbor’s shoes for $1,000. Wouldn’t all that “spending” save the day?)
This is a misleading question. The economy *is* spending, by definition; but more importantly, it is spending on new effort that creates. By simply trading money for no work, we gain nothing – again, the dollar is a tool for trading, not wealth itself. If we all give each other $20, we waste everyone’s time. If we all make *new* shoes, and *then* pass around $20 in exchange for them, we have an economy.
If it helps the economy to redistribute wealth, how about if the government takes away all existing wealth and divides it up equally, 300,000,000 ways? Would that fix everything?
Also a misleading question. Redistributing wealth is not inherently beneficial to a society, especially when that redistribution is not in line with individual effort. However, reducing the overall income gap *is* beneficial to society. The more top-heavy a society gets, with the upper-upper class holding more and more of the money, the more unstable it gets.
A healthy middle class is a healthy and stable nation, a large economy, and an improved quality of life for the nation as a whole. A weak or non-existent middle class results in a smaller economy, a lowered quality of life for the nation as a whole, and subsequently results in an unstable nation.
Effectively, what it comes down to is this: Money in circulation for trade of goods and services is a stabilizing force for society. Money held out of circulation is a destabilizing force, as is is not doing any work other than to foment jealousy.
If the problem is lack of jobs, how about if the government gives a job to anyone who wants one, paying them $50 an hour to carry empty boxes around in circles? Would that fix everything?
Again, this is misleading; suggesting that the only solutions being put forward are communist. Money is not wealth. If we want to pay people to do work, there is lots of *actual* work that needs to be done. There is no reason to start paying for box-carrying when we have infrastructure, medicine, farming, research, etc that needs doing.
If a lack of credit is the problem, how about if the government gives everyone a new, federal credit card with a $1,000,000 line of credit? Would that fix everything?
No. We have too much debt in general; and we’re going to have a rough time over the next few months as we reduce the debt in circulation to come closer to a safe ratio to the actual money in existence. I’m not much of a fan of 1:11 lending; 1:33 lending was insane, and we’re paying the price for it.
If “corporate greed” is the problem, how about if government outlaws making profits, forcing companies to sell things at prices that would just make them break even? Would that fix everything?
This is a specious argument; there is a vast gap between “lax regulation” and “outlaw all business”. Smart regulation is a necessary part of any market; or do you think that monopoly laws should be eliminated? What about workplace safety regulations? Food quality control?
This article seems to be mostly taking proposed solutions and extending them to ludicrous conclusions which you can do with almost any argument. Like it or not, unregulated capitalism is a failure, tax cuts or credits for corporations and the financial sysem is a failure and it doesn’t take a Democrat or a Republican to see that. It’s not just the last 8 years although Bush & Co raised it to an art form — drastically cutting taxes for the upper class, fighting two wars, conducting a ‘war on terrorism’ and telling the people to buy SUVs and go shopping. Why socialism is considered an evil is beyond me — the banks didn’t think it was so evil when they buggered things up beyond control. FDR was castigated for his programs but at least they’ve provided a safety net for the lower classes and middle classes and the elderly – the programs that Reagan didn’t dismantle and the country didn’t go to the dogs and there sure hasn’t been any lack of the ultra wealthy.
30 years of capitalism Reagan-style, or Coolidge-style is always a disaster for the working man. There are tons of sites and books that show for the blue collar worker and the average white collar worker there’s been either stagnation or a lowering of living conditions since the 70s. We work a ton of hours and it looks like we’re improving, but we’re working those hours because people got laid off and eventually you get laid off when your company gets tax credits for outsourcing or moving to where the lowest labor pool is. The last time the disparity between the income of the top two or three percent of the country and the average working stiff was as high as it is now was 1928. I do not favor bailouts for financial institutions, just the fear that government would take them over would work – it did in Sweden in the early 90s. They ended up taking over 2 banks and the rest quickly either merged or learned how to operate without risktaking. At this point a stimulus of some kind is needed. I can’t sit here and say I know exactly what needs to be in it or not, but I do know I wouldn’t let a Republican or Pelosi or Reid near the thing. You give money to banks without any oversight or parameters or threats of what happens with what you do with it, you’ve made a bad situation worse. Tax cuts do not trickle down, they never have trickled down and to keep proposing that as a solution is almost criminal. Nationalize Citi and BOA and hopefully that would be the end of their arrogance and playing with tax payer money like it’s monopoly money. Stimulate spending with a boatload of money on infrasctructure, money that stays in America and give people who have no money at all –which i qualify for at the moment– a generous stipend or the promise of a good job and I guarantee there is going to be no hoarding of it or investing in stocks now that they’re down. We’ll spend it on real stuff or pay off debts. The worst thing to do is nothing and hope it all straightens itself out. Normally maybe it would. I don’t think this qualifies as normal. And yes, just print it if you have to, what do you think everybody in every country has been doing for the last how many years. As long as people are confident in even paper money it’s going to work.
By the way, I’ve read the other articles on this site and agree with most everything in them. But this one, though it may be right and I’m totally clueless, just comes off as simplistic. I’ve read too many economists and money people who say this is something we’ve never seen before – there is trillions of dollars in debt in the private sector on top of the government debt and it’s worldwide. Maybe there is no way to solve it but if we are going down I want the government at least trying and not Hoovering and commiserating and talking about good times just around the corner. There probably are no good times ahead for our generation — I’m closer to the final box than college or young manhood – but I want all governments to do something. Seeing good paying jobs heading off to India and China combined with toxic loans and paper trading for millions has convinced me the last people to lead us out of this are banks and corporations.
Another btw – #12 Bush IS a criminal, ran up massive debts, violated liberties, waged awful wars, and on and on and on and while I agree he’s not solely to blame, just about everything he did contributed to this. Pants down on 911 which led to partisan decisions to capitalize on that while not inconveniencing the American public in any way, and letting big business and Wall Street have Christmas for 8 years.
Guillermo – you’re absolutely right, wealth isn’t just the accumulation of “stuff” whether it’s a bunch of domestic products, or imported products, or a bigger pile of paper that becomes less valuable every year.
Too much wasteful spending, too much debt, and too much inflation got us in this mess.
More of the same is not going to get us out of it.
#17 Mike C – one thing you’re absolutely right about is 30 years of “capitalism” reagan style is a major player in our problems. The reality of it all though, is that what these people practiced is way closer to fascism than freedom.
I would prefer much less government/corporate combinations – fascism – than more….to get us out of this.
“Fascism should more properly be called corporatism because it is the merger of state and corporate power.” — Benito Mussolini
WHY DON’T WE JUST HANG THEM ALL AND QUIT PLAYING THIS GAME ! HOPEFULLY IN THE PUBLIC SQUARE !! I AM TIRED OF EATING CAKE AND LIVING UNDER THIS BANNANA REPUBLIC !
Larken Rose is right about everything he says, if he was talking from a reality in which there is free trade and decentralized monetary issuance. The central bank paradigm we have in the United States has turned into a monster that requires a war machine to service it’s appetite. This system is bankrupt, morally and financially. If we bailout and support the existing banks, we get more of the same. If we nationalize, reconfigure, decentralize and return to a privatized model that is more in line with the vision in our Constitution, we may be able to realize the free trade dream Rose speaks of. Meanwhile, people are entering a desperate state and without government intervention they will suffer and lose their businesses, regardless of how hard they have worked.
Oh yea Mary , privitization is working really well isn’t it ? lok what happened with the health insurance industry ? hows that working for ya ? hows the privitzation of the wars in Iraq and Afghanistan working for ya ? REAL WELL FOR THE MERCENARYS AND THE HALIBURTENS !! gees I don’t get you people !! more globalization for the rich , yea Mary that is working real well . are you a corporation or a person ? oh yea according to the desription there is no dieeference , hmmmm that seorking real well too. are ya kdin me ?
What a bunch of propaganda. So your defending corporate America and how the wealth of this country has been redistributed to them over the past 30 years.
I’ll bet you want to see more tax cuts for the wealthy don’t you. Your also against unions where working class have some chance to better their economic situations.
Tell us what corporations are paying you off and supporting your so called Populist Party.
Hey Dave, while I realize that simply opposing the proposal at hand often leads people to partisan reactions – and assumptions that there’s support for what’s happening now, this is not the case in my opinion. And it doesn’t seem like the author is saying that he wants things to go on how they are either.
The reality is that the corporatism that you correctly refer to has gone on for much longer than you say, but yes, in the last 30 years or so it’s gotten extremely bad.
That needs to end.
But we’re not going to get out of this mess with a different kind of corporatism either – government keeping all those corporations you talk about in business.
The best solution is revolutionary – let those that kept fraudulent balance sheets, who have plundered our economy, who have profited off war, and the like – go out of business.
They shouldn’t be rewarded for their bad behavior.
On top of it all, the country is broke. The government is broke, and most people are broke too.
As far as tax cuts, it’s not the wealthy – every person deserves to be treated equally. How about we just let you and every individual (not corporate “person”) keep what you earn?
That would be a HUGE stimulus, and you could spend or save how you see fit! The government wastes most of what they take from you on war and militarism anyway. Who the heck wants to fund that?
#15 river wind: While I don’t agree with all your positions, I’d like to commend you on taking a moment to actually answer the questions – especially the ones you disagreed with! Seems like such basic discussion is missing far too often. Thank you for your perspective!
I have read the essay by Larken Rose and the comments and although one or two of the commentators have come close placing the blame where it belongs none have done so to my satisfaction. The situation we face today, as well as most of the nation’s problems throughout our entire history, have resulted from allowing the obviously fraudulent practice of fractional reserve banking. Central banks are simply a refinement of the original principles of fractional reserve banking. If you research the history of fractional reserve banking, beginning at least as early as the writings of Thomas Jefferson I think you will find it very difficult to reach any other conclusion.
Al Larson your exactly right , lets get rid of the Federal Reserve , talk about a private group controlling it all, they have done a good job havent they ? but kennedy was killed over trying to abolish it , and everyone else will be too. so don’t hold your breath , I guesss we will all have to sit back and wait till we are all in cardboard boxes , and just wait , seems like we have no control anyways !
“Government, on the other hand, consists of people who are too clueless to be successful in the free market, and whose success (in politics) ..”
Author of this article..you are such an idiot. It is a cliche to blame the government for everything. As you might have guessed, I work for the public institution and thanks but I am not clueless and the only reason I did not go to the corporate world is because I believe in what I am doing in the public sector, just like what you probably believe what you are doing in the private sector unless of course it is only about making money for you.
There are many folks who work in the private sector for a lot less pay than your fact cat buddies because they believe in what they do. Many of them including myself have masters’ degrees and can easily find a job in the marketplace, but we either choose to stay or come back from the corporate world to the public sector. To paint all those people as clueless and stupid is simply arrogant and dumb on your part. I am not even talking about politicians, which for some reason go to private companies to work for after they lobby for them in the public sector. I guess they are not that dumb. Either way..I am not a senator or whatever. I just believe in what I am doing…mainly educating your ignorant asses in higher ed so that you could come back and blame the government and not your selfish nature.
So, back to the point. To blame the government for everything sounds cool and makes you feel like you have balls, but is simply stupid. Free market cannot exist on its own and never will, so as communism is a disaster as well. Free market without rules is like a football or baseball game without rules. Imagine if there were no rules in sports. What if a sports team were to regulate itself and each team made their own rules. I would like to see you try to ensure competition in that kind of environment then. So, if you are so smart, try to grasp it, big balls.
Al, you bring up a really important point – Fractional Reserve Banking!
This is likely something that most people have never even heard of, but it’s absolutely ruinous for our economy, and the worst is yet to come. Basically, what it means is that banks are only required to keep a percentage of their depositors’ money – I believe right now the requirement is 10%.
What does this mean? Well, as an example, say the Federal Reserve has $100 in their vaults. Then, they loan out $1000 to commercial banks (10% on reserve!), who in turn loan out $10,000 to other banks and/or business….and the cycle continues.
This does a couple of things – it makes every single bank in the country (and probably most around the world), inherently unstable and at risk of collapsing under a run at any time.
It also increases the money in circulation – which lowers its value. Think of it this way, to keep it simple – if there’s 100 products available, and $100 available, each will cost an average of $1. But, if you increase the amount of money to $500 without increasing the products, they’ll end up costing upwards of $5 each. It’s a very simplified example, but it’s there…
I just picked up a copy of Murray Rothbard’s “The Mystery of Banking” and would definitely recommend it to anyone who wants to understand how the entire fraudulent banking system – from the fed to your local bank – works.
The SEC used to allow 1:11 fractional banking – for every dollar in the vault, a bank could loan out 11 dollars. This was changed in 2005 to allow up to allow a 1:33 ratio – 32 fictional dollars in debt for every actual dollar in the bank!
Lehman Brothers was the only bank I’m aware of that was at the 1:33 ratio at any time, and surprise, surprise, they failed first. Most of the banks which have failed subsequently was also well above the old 1:11 ratio; at least as of November of ‘08, those banks with the higher ratios seemed to be failing almost in order of their debt load.
I don’t know off the top of my head what the current overall debt ratio is across the nation/world, but as we pull back from 1:33, we will continue to see few loans being made – it’s not just that the banks don’t have money, it that they have so much outstanding debt that the money they do have is not a large enough fraction to get them back to where they feel comfortable.
Where “comfort” lies is also not so clear, but it appears to be a bit below 1:11. It is possible that many banks are also holding onto cash with an eye towards buying up competitors later this year, but I don’t think that’s the majority force behind their current behavior.
Let’s look at the other side of your reduction ad absurdumn argument. What would happen is we eliminated ALL taxes, federal, state and local. Firs all government workers. Disband the military, the police and fire departments. Let the crumbling bridges fall and the pot holes grow till they swallow trucks. We could soon turn America into a perfect place for conservatives. Alternatively, those who yearn for such a system could just move to where it already exists — Somalia.
Hey Jim, while I understand where you’re coming from, it’s just a bit off base. If, for example, the income tax was eliminated and you and every other person didn’t pay a single dime to the federal government, they would still take in the same amount of money as they did about 15 years ago.
From politifact:
After issuing refunds, the IRS collected $880-billion in individual income tax in 2005. Subtract that from total tax collections for 2005 – which equaled close to $2-trillion – and you get $1.12-trillion.
By comparison, total tax collections in 1995 were about $1.27-trillion.
Yes, there absolutely needs to be some major cutbacks – how about we start with the military being based all around the world? Then, at the very least we could use the trillions of dollars wasted trying to maintain a global empire to pay for all the promises made here at home.
I don’t think that’s ideal, but it’s a really good start.
The fact of the matter, though, is that even without collecting a single penny of individual income tax, the feds would still take in over $1 trillion dollars.
The rest? Well, it would amount to a $880+ Billion “bailout” right to you, and your friends, and your family. Not to some corporate fat cats who waste it.
River – do you have a source for those numbers? I thought it was 10% reserves too. Which is awfully destructive on its own, but33-1????? That’s insanity.
To assume that taking money away from the governmet would destroy the economy is absurd beyond belief. Government isn’t God, and it can’t create anything that it doesn’t take from someone else.
What’s unseen in the stimulus package is where taxpayers would spend that trillion dollars if it wasn’t taxed or inflated away from them. That money would certainly produce jobs that will instead be destroyed by the stimulus package. And those jobs would produce goods and services actually demanded by the market, rather than by politicians and lobbyists and bureaucrats. There is no way the government can create more productive jobs with its package than if it were to do nothing.
We haven’t had a free market, the powerful have long used their influence with government to obtain subsidies that distorted the market while further increasing their wealth.
As for redistribution of wealth – the government for some time now has been redistributing wealth from workers to the wealthy. The people making the big bucks have been those who produce nothing, just shuffle money around or place rigged bets on the prices of commodities.
Bailing out the bankers is a bad use of the government’s credit, but job creation to rebuild our infrastructure and stimulate the economy is not, and neither are tax rebates to the poor and middle-class. These measures will re-redistribute money back to the people who actually create wealth. This is the quickest way that the imbalance in our economy, which is the source of our current woes, can be corrected.
I think you make some excellent points about the government and the market, greenknight. Those that keep blaming what we’re experiencing on the “free market” are completely off base because – free market would mean that government doesn’t interfere in the economy.
In reality, the government gets involved in just about everything. Whether people think that’s good or bad is not as important as at least recognizing that “markets” in the US are anything but ‘free’
As far as tax rebates – yes, I think people should get money back that was taken from them under the threat of force.
4. KBR did that with their fuel trucks in Iraq. They ordered their drivers to drive drive around with empty trucks just to charge the Army. The drivers were upset about it and called their cargo “sailboat fuel.”
this should help you all understand what is going on !
How realistic is a North American currency?
Commentary: Uniting U.S., Canada, Mexico money could result from crisis
By Todd Harrison
Last update: 6:12 a.m. EST Jan. 28, 2009 Comments: 562
“World, hold on. Instead of messing with our future, open up inside.” — Bob Sinclair
NEW YORK (MarketWatch) — Thomas Jefferson once said: “When you reach the end of your rope, tie a knot in it and hang on.” As the global financial system pushes on a string, investors are desperately trying to hold tight.
The New World Order is upon us, full of hope, promise and a fair amount of fear. In our recent discussion regarding the direction of our country, we noted the risks of catering to conventional wisdom and the implications for the U.S. dollar. See MarketWatch column on New World Order.
The Minyanville mantra is to provide financial news you need to know before you know you need it. That’s a fine line to walk, as foresight often flies in the face of mainstream acceptance.
In 2006, it seemed counterintuitive to forecast a “prolonged socioeconomic malaise entirely more depressing than a recession.” See Minyanville column.
For years, the notion of an “invisible hand” was conspiracy theory until we learned that the Working Group on Financial Markets was a central policy tool. See Minyanville column.
And now, as we gaze across our historically significant horizon, we must open our minds to thoughts and ideas that may seem foreign to folks conditioned by the past and stunned by the present.
Currency crossroads
As governments take on more risk — as they price assets on behalf of the market and transfer debt from private to public — the common denominator, or release valve, becomes the currency.
As you are reading this, the Senate is debating provisions for the Stimulus Package. Under the current Senate version, the Stimulus would NOT prevent the jobs created from going to Illegal Immigrants.
About 15% of all construction jobs go to Illegal Aliens, and estimates say that this package could create up to 2 million jobs. As there is nothing in this Bill preventing these jobs from going to Illegals, at least 300,000 of these jobs would undoubtedly go to Illegals, as a recent Center for Immigration Studies report has shown.
The good news is that the House version of this Bill has a provision requiring contractors to use the E-Verify system which would let employers ascertain whether their workers were authorized to work in the U.S. The bad news is that the Obama Administration has delayed implementation of E-Verify for government contractors, presumably to allow time for them to cram their planned Illegal Alien Amnesty Bill down the throats of the American People in a few weeks.
SPOONERITE !! what do you mean the govt doesn’t create jobs !? that is rediculous , what is the defence dept , the post office, my god man … of course they created jobs , whats the miiatary and all the civil service jobs ??? are ya kiddin me ? I hope no one fell for this hogwash , boy if they did people are really stuck on stupid ! the government is the biggest employer of jobs ! duh !
Andy , you fool no one , YOU STAY AND WORK FOR THE GOVT FOR ONE AND ONLY ONE REASON — it pays good , its stable , and it has great benifits , AND TO WORK IN THE COPRORATE WORLD IS MUCH MORE RISKIER , VERY UNSTABLE , AND THEY SCREW THEIR WORKERS . , and it is very hard to get layed off or fired from a govt position . You don’t fool anyone not even yourself. but hey no one is downing you for covering your own butt we would do the same . its all good. But we aren’t stupid either .
Spoonerite is actually correct in some ways on this issue, Ruth, and so are you. I don’t know if the proper point was made clearly though.
Like you’ve said, there’s millions of people employed by the government. But, it’s a fallacy to automatically assume that without the government these same people wouldn’t find productive work elsewhere.
Government projects may create jobs, but the real important question is, do they create wealth?
While employment is a huge necessity, employment alone isn’t the proper indicator of economic success; overall wealth is.
The government could easily reduce unemployment to 0% by mandating that every unemployed citizen shovel dirt on some government project.
Even if government spending can “create jobs,” creating jobs alone does nothing for our overall prosperity or standard of living.
When government spends money, it simply takes that money from one place (taxpayers) and moves it to another (state employees, roads, etc.).
Governments really have just three basic methods to pay for jobs:
1. They raise it through taxation.
2. They create money out of thin air.
3. They sell bonds on the open market.
This is not increasing wealth. It’s simply moving wealth from one area to another – and the sad part is that it often times reduces the country’s standard of living over time.
Increased taxes are a burden on everyone, and more debt or new money (inflation) hurts future generations more and more every year.
“Government employment programs can only create some jobs by destroying others, and government attempts to protect some jobs can only succeed if the government sacrifices other jobs. In both cases, these interventions make us poorer.”
What we need are jobs that are productive. We need to spend less, save more, stop the inflation, and start making things in this country again.
My primary question to you, Ruth, is this:
What do you do when the government is broke – like it is now?
Michael , I beleive everything you psoted to me to be true , except the fact that spoonerite was correct is nstating the govt does not create jobs …. as you mentioned ..it does . so its like being a little bit pregnant … that is impossible ! you are or you are not. the govt creates jobs or it doesn’t. I think if we added the liars ,cheats , and the corruption to the index table here , we can easily discover why we are in the mess we are in. There are MANY factors leading this fiasco , but the greatest is not incompetence ( as they would like us to believe it is an agenda ) an agenda that has lead us to where we ae and will continue to do so untill the sheeples learn to connect the dots .
If I build a bridge in Iraq after bombing and destroying another one, have I created a new bridge, or just replaced a different one?
I guess if you just look at the short term effect on one segment, and ignore the destruction that was caused first, a new bridge has been created.
But, if you look long term over a wider area, the net change in # of bridges is zero. And overall, it’s actually a loss, because new resources need to be taken to first destroy the old one, then more are taken to build the new one.
Guierellmo , excellent comment and the best advice I have seen all day !! I do not own a TV , and I certainly wouldn’t pay some company like cable to propagandize me or my famiy ! Don’t be attached to what you are leaving behind.
if your poor and living in the streets or live in a crap environment think about all that put you there. And who’s fault is it, your because you didn’t try and why should we just shovel them money when they haven’t done anything but sit on their behind and drink and do drugs and the crap that plagues our country.
This “stimulus” is not wealth production. This is wealth consumption. It is nothing more than a massive spending bill. Maybe you like the things they spend on, maybe not. But that doesn’t change the fact that it’s consumption and not “investment” as the politicians call it. After 8 years of lying, warmongering Clinton, and another 8 years of lying, warmongering Bush, why do people even trust this criminal government anymore? It’s beyond me.
Do enough of this nonsense and you can destroy the livelihoods of an entire generation.
Dave there might be a rare few that beleive the govt , I and most are not one of them , the problem is there is nothing you can do about it anyways . bleive me we have tried . I think they know we don’t beleive a word they say ,but they don’t care what we think. basically there has been a coup and here we are , for now anyways I think the country is gone and I am not sure we can get it back.
I hear all kinds of people talk about how they just don’t trust the government, especially after all we’ve been through over the past decade or two. So Ruth, like you, I don’t trust them either.
So it really amazes me when these same people believe in the idea that government can help the economy. Of course, if I buy a honda civic for $100,000, I succeeded in buying the car. But, did i do it economically, was I efficient, did I waste?
That’s what the government does when it “creates jobs” It wastes, it takes from more productive areas, and it puts the bills on future generations. And that’s just morally wrong.
If these wealthy/greedy venture capitalists, hedge fund CEOs, etc. really want unfettered capitalism to run its course, then we should give them what they deserve by reniging the bailout. Even if it hurts us too, it may hopefully teach THEM a lesson, since they think its THEIR government and not ours. Its just a temporary fix, anyway, since big government is in COLLUSION with corporate america. You can’t expect facists like Limbaugh and Hannity (with their $50 million and $20 million annual salaries) to have any sympathy for the rest of us, because they have no concept of what its like to financially struggle! I almost barfed the other day when Glen Beck implied that inner city people in the northeast were “enslaving themselves to socialism”. Someone needs to tell these self-righteous elitists that there is a big difference between a democrat and a socialist. Not to mention that america is enslaving the Iraqi people in capitalism. They don’t want it! Why do we insist on forcing our culture and free market system on everyone like we did when we disenfrancised native americans, because we think the whole world should have it? It doesn’t work for everyone! They think socialism is inherently evil, because they fear what they don’t understand (or anyone who thinks or even looks differently than they do). I’d still prefer capitalism over socialism if we weren’t in bondage to the banking and lending institutions. However, history tells us that neither system seems to be better than the other.
Robert, you make a very important point here. The proper response to economic and financial incompetence should not be to prop up and subsidize error, greed, and corruption.
The only way out of this mess is to reorganize the economy – and that starts with allowing those failing corporations to go bankrupt, or completely out of business. Then – all those resources (labor, land, capital) can be purchased by new people, to use properly or fail.
But of course, the politicians and their corporate buddies aren’t interested in this kind of failure….that would be a revolution against their control over our economy.
Capitalism without bankruptcy is like Christianity without hell.
Hey River, thanks for the links and the follow up on this article….got some readin’ to do! Looking forward to seeing your perspective on some other posts around here too!
You guys will love the revised leveraging numbers I just came across. It seems that the 33:1 ratio was indeed just the top-end (Bear Stearns) back when I was first reading about this, and not a policy rule as I had originally gleaned.
To be fair, this partially is due not to realized losses, but to mark-to-market accounting; recording debt based on current-market value, even if you’re not actually planning on selling the asset any time soon. http://en.wikipedia.org/wiki/Mark_to_market
Wow, that’s just jaw-dropping, river. Glad you came back with a follow up on that. Even if it were just 33, it would be far too massive. Hope to see you on some other posts around here soon!
So many have said that Larken’s piece is ludicrous. And I agree to a point, however, from my view he was demonstrating how ludicrous the bailouts are.
I didn’t see it mentioned but I watched a Senate hearing on C-Span two or three weeks ago, where the subject was the $300 Billion bailout for 400,000 homeowners approved last April.
I had divided $300 Billion by 400,000 and the result revealed to me that if 400,000 were helped and the total $300 Billion were spent, then it would cost the taxpayer $750,000 for every mortgage saved. If less than that were saved, and the entire amount spent, it would cost more than $750,000 for each mortgage saved.
So I wrote an article about it on this blog.
Well anyway in this Senate hearing, the question was asked “How many mortgages have been saved by this bailout since April. The answer was 13.
I figured that $300 Billion @ 5% Interest for one year would yield $15 Billion of earned interest. So if my math doesn’t fail me
the cost of bailing out those 13 mortgages exceeded a Billion each ( that’s 1,000 Million ).
See Larken’s story isn’t so lubricious after all. Because what I have reported here has actually happened. It is not speculation.
I wonder if we’re going to see “mother of all bailouts” version’s 2, 3, and 4 coming out of the Obama administration. all they know how to do is borrow and spend – way beyond our means, and it’s not going to fix anything. So, will they add a few trillion next year?
River-Wind. Sorry to be so late to respond. I too have looked for articles. None to be found. But I did see the Senate Hearing on C-Span. I’ll look and see if I wrote anything down that might show the when, I will let you know.
Thank you, Cliff Carson. I’ve taken a look at that article and a few others based on some further searching.
The reality does seem to be that the program was a failure so far, though the good news is that by failing, it hasn’t used much of its $300M budget yet. I have not, however, found any estimates of how much *has* been spent, to get a better feel for the actual dollar/mortgage ratio at this time.
I believe every government program to be a failure no matter what the economic result. why? because to make one company or one group more profitable, they have to take that same money from someone else.
River-Wind. What got my attention was that the interest on the $300 billion for the year the money was allocated would amount to around $15 Billion. Someone is raking that in.
And just as bad is that if the 400,000 mortgages had been saved at the cost of the $300 Billion the cost would have been $750,000 for each saved mortgage!!!
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Everything I’ve read by Larken Rose has been amazing work. This one sure didn’t disappoint either!
From one of my favorite books, Economics in One Lesson:
In a free economy, in which wages, costs and prices are left to the free play of the competitive market, the prospect of profits decides what articles will be made, and in what quantities—and what articles will not be made at all. If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself.
One function of profits, in brief, is to guide and channel the factors of production so as to apportion the relative output of thousands of different commodities in accordance with demand. No bureaucrat, no matter how brilliant, can solve this problem arbitrarily. Free prices and free profits will maximize production and relieve shortages quicker than any other system. Arbitrarily fixed prices and arbitrarily limited profits can only prolong shortages and reduce production and employment.
The function of profits, finally, is to put constant and unremitting pressure on the head of every competitive business to introduce further economies and efficiencies, no matter to what stage these may already have been brought. In good times he does this to increase his profits further, in normal times he does it to keep ahead of his competitors, in bad times he may have to do it to survive at all. For profits may not only go to zero, they may quickly turn into losses; and a man will put forth greater efforts to save himself from ruin than he will merely to improve his position.
That’s about the size of it. Let’s just print a ton of money, force banks to lend, and spend like crazy on cheap foreign products. We’ll all be rich!
I really like the list of questions in this article. Common sense stuff. I wonder what kind of answers would be given by bailout supporters. Probably things like, “Yeah sure, but THIS is different!”
If “freedom” naturally discards stupid ideas, we are not free, as we certainly have had a lot of stupid ideas dumped on us.
The “free market” being one of them. Markets are made by men and controlled by them for their own profit. The real term for “free market” is “oligopoly” The real term for the U.S. economy is “oligarchy”. The only “freedom” that exists is the “freedom” of the corporation to do exactly as it wants to.
The idea that government is inherently bad, is another of those ideas. The current economic mess is an excellent example. Less government involvement has given way to more corporate invervention and dominance of our lives. We now have corporations sucking the life blood out of us. Corporations have ruined our economy and our lives more so than anything the government has ever done. We have become a government “of, for and by the corporation”, instead a government “of,for and by the people. No successful society is entirely “free”. There will always be someone telling us what to do. After the events of the past few years, I’m convinced the corporations can screw it up worse than the government. Talk about clueless people!! Milton Freidman is dead and “free market economics” can be buried right along with him.
Would a continuation of what got us to where we are fix everything? That is the insanity of doing something over and over with the expectation that it will turn out differently. Only Angels could make capitalism work for a while, but even they would eventuall be forced into corruption by the inherent nature of the system, because there is no place in Capitalism for empathy.
Larken Rose’s article “The Mother of All Bailouts”seems to take any good idea that may help the middle class and help to fix the economy and twists it into ridicule. Let’s not forget that it was eight years of George Bush, Dick Cheney and the Republican Party that caused this disaster. Perhaps Rose should run as a Republican!
This is the poorest example of intelligence I have seen in a long time.
Plato struggled to apply reason and prudence to the solution of man. We must try and solve the political conflict and economic tension that we are living with today.
The American Recovery Act will:
help our schools
help the unemployed
create clean energy
create a middle class tax cut
create more health care
Larken Rose tries to deceive the citizens and erode public trust with his misplaced words.
My concern is the duty that is connected with social obligation.
This is about as silly a blog as I have ever read. More bullshit and wringing of hands. Where’s the REAL solutions? Why are people so into the immediate fix-it solution, when it’s taken 8 years to destroy this country as thoroughly as it has? When this group, along with other groups, comes up with viable, alternative solutions, I’ll pay more attention to them. But until then, I just see a bunch of cry-babies and whiners.
Something becomes valuable through the amount of work required to produce it. Wealth can be anything. It’s a state of mind. What’s worth more? A healthy ecosystem or a humvee? A yacht or a healthy body? We have been programmed from birth to equate accumulating stuff with being wealthy. We can’t help it. If we don’t buy something we don’t feel right. Remember that scene in Conspiracy Theory? Where he has to buy a copy of that book and he doesn’t know why?
Turn away from “stuff”. Start a vegetable garden. Buy locally. And for God’s sake, stop watching TV.
There’s plenty of ignorance about economics here, just as the author has stated. He asks some simple questions – and those that seem to want the bailout only get angry, call him a republican, or just repeat the mantra that the bailout is going to help people.
Bryan makes the best statement of all:
“If “freedom” naturally discards stupid ideas, we are not free, as we certainly have had a lot of stupid ideas dumped on us.”
He’s absolutely right – we’ve had stupid ideas dumped on us, but he’s way off base in thinking this was just over the last eight years.
Corporations are far from innocent in this mess, and so are individual people, as they have taken on way too much debt too.
but no one seems to answer the important question – where does the bailout money come from?
#7 repeats the same idiotic nonsense again. 8 years of Bush got us in this mess. Bush is a criminal, ran up massive debts, violated liberties, waged awful wars, and on and on and on.
But to think that Bush is the only reason we’re facing the huge crash that’s coming our way is either a complete partisan lie, or totally ignorant. I’m hoping it’s the latter.
How does printing up a bunch of new money to pay for stuff we can’t afford help the middle class? End result of all these fascist bailouts from the Bush/Obama years are going to be an even worse off middle class.
And watch these people come back and say we’ve still had too much freedom. Maybe the government should own everything!
The financial crises was created by the government. By relaxing all the restrictions on loans, and encouraging lenders to lend to anyone with a pulse. And lets not forget what role the Federal Reserves played with the artificially low interest rates that added even more fuel to the the fire.
People should be demanding an explanation from the government for purposely creating this crises!
Williamson, some really good points. I’m all for some regulation – how about we regulate the secret federal reserve?
Understanding the cause is essential for understanding the cure. Central banking, fiat paper money, and loose lending standards are the key players. Guess the proponents of the bailouts just want more of the same.
Or, they opposed bailouts under a “republican” but love them under a “democrat” Partisan hacks.
I really don’t think all the free give aways is neccessary , how about we just have a congress and govt that oes its job for the “people” !! what happened to making decisions baed on that and not paid lobbyist ? how about not having NAGTA , CAFTA , FREE TRADE , BANGSTER BAILOUTS , ETC . How about we quit relecting the same repretatives that DON’T represent us ? How about we have a living wage not a minimum wage , how about we get rid of OUTSOURCING ? HOW ABOUT WE SEND THE ILLEGALS BACK THAT GIVE 85 BILLION DOLLARS A YEAR TO THEIR HOME COUNTRY MEXICO IN REMITTANCES ? put that money back into our econmy instead of another countries pockets ? HOW about we have health care for americans that eliminates the insurance companies ? health care is a right not a privilege ! don’t need to add healthcare in on a vehicle or other product when sold . How about getting rid of the bets democracy money can buy period ? THIS ECONOMIC AND FINANCIAL CRASHE didn’t have to happen , washington is not and has not been doing their job that is what happened here, a few subprime loans DIDNOT BRING THIS COUNTRY TO ITS KNEES THIS GOVT DID BY ITS COMPLACENCY , LIES , THEIVES AND CORRUPTION AND UNITL WE THE PEOPLE DECIDE TO DO SOMETHING ABOUT IT , WE ARE GOING TO CONTINUE TO BE RAPED BY OUR OWN GOVT.
As mentioned above, if not having enough dollars is the problem, why not have the government give each person a million bucks? Would that fix everything?
No, because by simply increasing the number of dollars, you decrease the inherent value of each individual dollar. The dollar is not wealth, it is a tool for moving wealth. *Work* creates new wealth.
If increasing spending fixes an economy, how about if we all stand in a long line, and everyone hand $20 to the person next to them? How about $1,000? Would that fix everything? (Or, if gifts aren’t good enough, everyone could buy his neighbor’s shoes for $1,000. Wouldn’t all that “spending” save the day?)
This is a misleading question. The economy *is* spending, by definition; but more importantly, it is spending on new effort that creates. By simply trading money for no work, we gain nothing – again, the dollar is a tool for trading, not wealth itself. If we all give each other $20, we waste everyone’s time. If we all make *new* shoes, and *then* pass around $20 in exchange for them, we have an economy.
If it helps the economy to redistribute wealth, how about if the government takes away all existing wealth and divides it up equally, 300,000,000 ways? Would that fix everything?
Also a misleading question. Redistributing wealth is not inherently beneficial to a society, especially when that redistribution is not in line with individual effort. However, reducing the overall income gap *is* beneficial to society. The more top-heavy a society gets, with the upper-upper class holding more and more of the money, the more unstable it gets.
A healthy middle class is a healthy and stable nation, a large economy, and an improved quality of life for the nation as a whole. A weak or non-existent middle class results in a smaller economy, a lowered quality of life for the nation as a whole, and subsequently results in an unstable nation.
Effectively, what it comes down to is this: Money in circulation for trade of goods and services is a stabilizing force for society. Money held out of circulation is a destabilizing force, as is is not doing any work other than to foment jealousy.
If the problem is lack of jobs, how about if the government gives a job to anyone who wants one, paying them $50 an hour to carry empty boxes around in circles? Would that fix everything?
Again, this is misleading; suggesting that the only solutions being put forward are communist. Money is not wealth. If we want to pay people to do work, there is lots of *actual* work that needs to be done. There is no reason to start paying for box-carrying when we have infrastructure, medicine, farming, research, etc that needs doing.
If a lack of credit is the problem, how about if the government gives everyone a new, federal credit card with a $1,000,000 line of credit? Would that fix everything?
No. We have too much debt in general; and we’re going to have a rough time over the next few months as we reduce the debt in circulation to come closer to a safe ratio to the actual money in existence. I’m not much of a fan of 1:11 lending; 1:33 lending was insane, and we’re paying the price for it.
If “corporate greed” is the problem, how about if government outlaws making profits, forcing companies to sell things at prices that would just make them break even? Would that fix everything?
This is a specious argument; there is a vast gap between “lax regulation” and “outlaw all business”. Smart regulation is a necessary part of any market; or do you think that monopoly laws should be eliminated? What about workplace safety regulations? Food quality control?
This article seems to be mostly taking proposed solutions and extending them to ludicrous conclusions which you can do with almost any argument. Like it or not, unregulated capitalism is a failure, tax cuts or credits for corporations and the financial sysem is a failure and it doesn’t take a Democrat or a Republican to see that. It’s not just the last 8 years although Bush & Co raised it to an art form — drastically cutting taxes for the upper class, fighting two wars, conducting a ‘war on terrorism’ and telling the people to buy SUVs and go shopping. Why socialism is considered an evil is beyond me — the banks didn’t think it was so evil when they buggered things up beyond control. FDR was castigated for his programs but at least they’ve provided a safety net for the lower classes and middle classes and the elderly – the programs that Reagan didn’t dismantle and the country didn’t go to the dogs and there sure hasn’t been any lack of the ultra wealthy.
30 years of capitalism Reagan-style, or Coolidge-style is always a disaster for the working man. There are tons of sites and books that show for the blue collar worker and the average white collar worker there’s been either stagnation or a lowering of living conditions since the 70s. We work a ton of hours and it looks like we’re improving, but we’re working those hours because people got laid off and eventually you get laid off when your company gets tax credits for outsourcing or moving to where the lowest labor pool is. The last time the disparity between the income of the top two or three percent of the country and the average working stiff was as high as it is now was 1928. I do not favor bailouts for financial institutions, just the fear that government would take them over would work – it did in Sweden in the early 90s. They ended up taking over 2 banks and the rest quickly either merged or learned how to operate without risktaking. At this point a stimulus of some kind is needed. I can’t sit here and say I know exactly what needs to be in it or not, but I do know I wouldn’t let a Republican or Pelosi or Reid near the thing. You give money to banks without any oversight or parameters or threats of what happens with what you do with it, you’ve made a bad situation worse. Tax cuts do not trickle down, they never have trickled down and to keep proposing that as a solution is almost criminal. Nationalize Citi and BOA and hopefully that would be the end of their arrogance and playing with tax payer money like it’s monopoly money. Stimulate spending with a boatload of money on infrasctructure, money that stays in America and give people who have no money at all –which i qualify for at the moment– a generous stipend or the promise of a good job and I guarantee there is going to be no hoarding of it or investing in stocks now that they’re down. We’ll spend it on real stuff or pay off debts. The worst thing to do is nothing and hope it all straightens itself out. Normally maybe it would. I don’t think this qualifies as normal. And yes, just print it if you have to, what do you think everybody in every country has been doing for the last how many years. As long as people are confident in even paper money it’s going to work.
By the way, I’ve read the other articles on this site and agree with most everything in them. But this one, though it may be right and I’m totally clueless, just comes off as simplistic. I’ve read too many economists and money people who say this is something we’ve never seen before – there is trillions of dollars in debt in the private sector on top of the government debt and it’s worldwide. Maybe there is no way to solve it but if we are going down I want the government at least trying and not Hoovering and commiserating and talking about good times just around the corner. There probably are no good times ahead for our generation — I’m closer to the final box than college or young manhood – but I want all governments to do something. Seeing good paying jobs heading off to India and China combined with toxic loans and paper trading for millions has convinced me the last people to lead us out of this are banks and corporations.
Another btw – #12 Bush IS a criminal, ran up massive debts, violated liberties, waged awful wars, and on and on and on and while I agree he’s not solely to blame, just about everything he did contributed to this. Pants down on 911 which led to partisan decisions to capitalize on that while not inconveniencing the American public in any way, and letting big business and Wall Street have Christmas for 8 years.
Guillermo – you’re absolutely right, wealth isn’t just the accumulation of “stuff” whether it’s a bunch of domestic products, or imported products, or a bigger pile of paper that becomes less valuable every year.
Too much wasteful spending, too much debt, and too much inflation got us in this mess.
More of the same is not going to get us out of it.
#17 Mike C – one thing you’re absolutely right about is 30 years of “capitalism” reagan style is a major player in our problems. The reality of it all though, is that what these people practiced is way closer to fascism than freedom.
I would prefer much less government/corporate combinations – fascism – than more….to get us out of this.
“Fascism should more properly be called corporatism because it is the merger of state and corporate power.” — Benito Mussolini
WHY DON’T WE JUST HANG THEM ALL AND QUIT PLAYING THIS GAME ! HOPEFULLY IN THE PUBLIC SQUARE !! I AM TIRED OF EATING CAKE AND LIVING UNDER THIS BANNANA REPUBLIC !
Larken Rose is right about everything he says, if he was talking from a reality in which there is free trade and decentralized monetary issuance. The central bank paradigm we have in the United States has turned into a monster that requires a war machine to service it’s appetite. This system is bankrupt, morally and financially. If we bailout and support the existing banks, we get more of the same. If we nationalize, reconfigure, decentralize and return to a privatized model that is more in line with the vision in our Constitution, we may be able to realize the free trade dream Rose speaks of. Meanwhile, people are entering a desperate state and without government intervention they will suffer and lose their businesses, regardless of how hard they have worked.
Oh yea Mary , privitization is working really well isn’t it ? lok what happened with the health insurance industry ? hows that working for ya ? hows the privitzation of the wars in Iraq and Afghanistan working for ya ? REAL WELL FOR THE MERCENARYS AND THE HALIBURTENS !! gees I don’t get you people !! more globalization for the rich , yea Mary that is working real well . are you a corporation or a person ? oh yea according to the desription there is no dieeference , hmmmm that seorking real well too. are ya kdin me ?
What a bunch of propaganda. So your defending corporate America and how the wealth of this country has been redistributed to them over the past 30 years.
I’ll bet you want to see more tax cuts for the wealthy don’t you. Your also against unions where working class have some chance to better their economic situations.
Tell us what corporations are paying you off and supporting your so called Populist Party.
Hey Dave, while I realize that simply opposing the proposal at hand often leads people to partisan reactions – and assumptions that there’s support for what’s happening now, this is not the case in my opinion. And it doesn’t seem like the author is saying that he wants things to go on how they are either.
The reality is that the corporatism that you correctly refer to has gone on for much longer than you say, but yes, in the last 30 years or so it’s gotten extremely bad.
That needs to end.
But we’re not going to get out of this mess with a different kind of corporatism either – government keeping all those corporations you talk about in business.
The best solution is revolutionary – let those that kept fraudulent balance sheets, who have plundered our economy, who have profited off war, and the like – go out of business.
They shouldn’t be rewarded for their bad behavior.
On top of it all, the country is broke. The government is broke, and most people are broke too.
As far as tax cuts, it’s not the wealthy – every person deserves to be treated equally. How about we just let you and every individual (not corporate “person”) keep what you earn?
That would be a HUGE stimulus, and you could spend or save how you see fit! The government wastes most of what they take from you on war and militarism anyway. Who the heck wants to fund that?
#15 river wind: While I don’t agree with all your positions, I’d like to commend you on taking a moment to actually answer the questions – especially the ones you disagreed with! Seems like such basic discussion is missing far too often. Thank you for your perspective!
I have read the essay by Larken Rose and the comments and although one or two of the commentators have come close placing the blame where it belongs none have done so to my satisfaction. The situation we face today, as well as most of the nation’s problems throughout our entire history, have resulted from allowing the obviously fraudulent practice of fractional reserve banking. Central banks are simply a refinement of the original principles of fractional reserve banking. If you research the history of fractional reserve banking, beginning at least as early as the writings of Thomas Jefferson I think you will find it very difficult to reach any other conclusion.
Al Larson your exactly right , lets get rid of the Federal Reserve , talk about a private group controlling it all, they have done a good job havent they ? but kennedy was killed over trying to abolish it , and everyone else will be too. so don’t hold your breath , I guesss we will all have to sit back and wait till we are all in cardboard boxes , and just wait , seems like we have no control anyways !
“Government, on the other hand, consists of people who are too clueless to be successful in the free market, and whose success (in politics) ..”
Author of this article..you are such an idiot. It is a cliche to blame the government for everything. As you might have guessed, I work for the public institution and thanks but I am not clueless and the only reason I did not go to the corporate world is because I believe in what I am doing in the public sector, just like what you probably believe what you are doing in the private sector unless of course it is only about making money for you.
There are many folks who work in the private sector for a lot less pay than your fact cat buddies because they believe in what they do. Many of them including myself have masters’ degrees and can easily find a job in the marketplace, but we either choose to stay or come back from the corporate world to the public sector. To paint all those people as clueless and stupid is simply arrogant and dumb on your part. I am not even talking about politicians, which for some reason go to private companies to work for after they lobby for them in the public sector. I guess they are not that dumb. Either way..I am not a senator or whatever. I just believe in what I am doing…mainly educating your ignorant asses in higher ed so that you could come back and blame the government and not your selfish nature.
So, back to the point. To blame the government for everything sounds cool and makes you feel like you have balls, but is simply stupid. Free market cannot exist on its own and never will, so as communism is a disaster as well. Free market without rules is like a football or baseball game without rules. Imagine if there were no rules in sports. What if a sports team were to regulate itself and each team made their own rules. I would like to see you try to ensure competition in that kind of environment then. So, if you are so smart, try to grasp it, big balls.
Al, you bring up a really important point – Fractional Reserve Banking!
This is likely something that most people have never even heard of, but it’s absolutely ruinous for our economy, and the worst is yet to come. Basically, what it means is that banks are only required to keep a percentage of their depositors’ money – I believe right now the requirement is 10%.
What does this mean? Well, as an example, say the Federal Reserve has $100 in their vaults. Then, they loan out $1000 to commercial banks (10% on reserve!), who in turn loan out $10,000 to other banks and/or business….and the cycle continues.
This does a couple of things – it makes every single bank in the country (and probably most around the world), inherently unstable and at risk of collapsing under a run at any time.
It also increases the money in circulation – which lowers its value. Think of it this way, to keep it simple – if there’s 100 products available, and $100 available, each will cost an average of $1. But, if you increase the amount of money to $500 without increasing the products, they’ll end up costing upwards of $5 each. It’s a very simplified example, but it’s there…
I just picked up a copy of Murray Rothbard’s “The Mystery of Banking” and would definitely recommend it to anyone who wants to understand how the entire fraudulent banking system – from the fed to your local bank – works.
#29 Michael Boldin:
The SEC used to allow 1:11 fractional banking – for every dollar in the vault, a bank could loan out 11 dollars. This was changed in 2005 to allow up to allow a 1:33 ratio – 32 fictional dollars in debt for every actual dollar in the bank!
Lehman Brothers was the only bank I’m aware of that was at the 1:33 ratio at any time, and surprise, surprise, they failed first. Most of the banks which have failed subsequently was also well above the old 1:11 ratio; at least as of November of ‘08, those banks with the higher ratios seemed to be failing almost in order of their debt load.
I don’t know off the top of my head what the current overall debt ratio is across the nation/world, but as we pull back from 1:33, we will continue to see few loans being made – it’s not just that the banks don’t have money, it that they have so much outstanding debt that the money they do have is not a large enough fraction to get them back to where they feel comfortable.
Where “comfort” lies is also not so clear, but it appears to be a bit below 1:11. It is possible that many banks are also holding onto cash with an eye towards buying up competitors later this year, but I don’t think that’s the majority force behind their current behavior.
Let’s look at the other side of your reduction ad absurdumn argument. What would happen is we eliminated ALL taxes, federal, state and local. Firs all government workers. Disband the military, the police and fire departments. Let the crumbling bridges fall and the pot holes grow till they swallow trucks. We could soon turn America into a perfect place for conservatives. Alternatively, those who yearn for such a system could just move to where it already exists — Somalia.
Hey Jim, while I understand where you’re coming from, it’s just a bit off base. If, for example, the income tax was eliminated and you and every other person didn’t pay a single dime to the federal government, they would still take in the same amount of money as they did about 15 years ago.
From politifact:
After issuing refunds, the IRS collected $880-billion in individual income tax in 2005. Subtract that from total tax collections for 2005 – which equaled close to $2-trillion – and you get $1.12-trillion.
By comparison, total tax collections in 1995 were about $1.27-trillion.
Yes, there absolutely needs to be some major cutbacks – how about we start with the military being based all around the world? Then, at the very least we could use the trillions of dollars wasted trying to maintain a global empire to pay for all the promises made here at home.
I don’t think that’s ideal, but it’s a really good start.
The fact of the matter, though, is that even without collecting a single penny of individual income tax, the feds would still take in over $1 trillion dollars.
The rest? Well, it would amount to a $880+ Billion “bailout” right to you, and your friends, and your family. Not to some corporate fat cats who waste it.
River – do you have a source for those numbers? I thought it was 10% reserves too. Which is awfully destructive on its own, but33-1????? That’s insanity.
To assume that taking money away from the governmet would destroy the economy is absurd beyond belief. Government isn’t God, and it can’t create anything that it doesn’t take from someone else.
Here’s some good insight from an article at CampaignforLiberty.com:
What’s unseen in the stimulus package is where taxpayers would spend that trillion dollars if it wasn’t taxed or inflated away from them. That money would certainly produce jobs that will instead be destroyed by the stimulus package. And those jobs would produce goods and services actually demanded by the market, rather than by politicians and lobbyists and bureaucrats. There is no way the government can create more productive jobs with its package than if it were to do nothing.
We haven’t had a free market, the powerful have long used their influence with government to obtain subsidies that distorted the market while further increasing their wealth.
As for redistribution of wealth – the government for some time now has been redistributing wealth from workers to the wealthy. The people making the big bucks have been those who produce nothing, just shuffle money around or place rigged bets on the prices of commodities.
Bailing out the bankers is a bad use of the government’s credit, but job creation to rebuild our infrastructure and stimulate the economy is not, and neither are tax rebates to the poor and middle-class. These measures will re-redistribute money back to the people who actually create wealth. This is the quickest way that the imbalance in our economy, which is the source of our current woes, can be corrected.
I think you make some excellent points about the government and the market, greenknight. Those that keep blaming what we’re experiencing on the “free market” are completely off base because – free market would mean that government doesn’t interfere in the economy.
In reality, the government gets involved in just about everything. Whether people think that’s good or bad is not as important as at least recognizing that “markets” in the US are anything but ‘free’
As far as tax rebates – yes, I think people should get money back that was taken from them under the threat of force.
4. KBR did that with their fuel trucks in Iraq. They ordered their drivers to drive drive around with empty trucks just to charge the Army. The drivers were upset about it and called their cargo “sailboat fuel.”
this should help you all understand what is going on !
How realistic is a North American currency?
Commentary: Uniting U.S., Canada, Mexico money could result from crisis
By Todd Harrison
Last update: 6:12 a.m. EST Jan. 28, 2009
Comments: 562
“World, hold on. Instead of messing with our future, open up inside.” — Bob Sinclair
NEW YORK (MarketWatch) — Thomas Jefferson once said: “When you reach the end of your rope, tie a knot in it and hang on.” As the global financial system pushes on a string, investors are desperately trying to hold tight.
The New World Order is upon us, full of hope, promise and a fair amount of fear. In our recent discussion regarding the direction of our country, we noted the risks of catering to conventional wisdom and the implications for the U.S. dollar. See MarketWatch column on New World Order.
The Minyanville mantra is to provide financial news you need to know before you know you need it. That’s a fine line to walk, as foresight often flies in the face of mainstream acceptance.
In 2006, it seemed counterintuitive to forecast a “prolonged socioeconomic malaise entirely more depressing than a recession.” See Minyanville column.
For years, the notion of an “invisible hand” was conspiracy theory until we learned that the Working Group on Financial Markets was a central policy tool. See Minyanville column.
And now, as we gaze across our historically significant horizon, we must open our minds to thoughts and ideas that may seem foreign to folks conditioned by the past and stunned by the present.
Currency crossroads
As governments take on more risk — as they price assets on behalf of the market and transfer debt from private to public — the common denominator, or release valve, becomes the currency.
As you are reading this, the Senate is debating provisions for the Stimulus Package. Under the current Senate version, the Stimulus would NOT prevent the jobs created from going to Illegal Immigrants.
About 15% of all construction jobs go to Illegal Aliens, and estimates say that this package could create up to 2 million jobs. As there is nothing in this Bill preventing these jobs from going to Illegals, at least 300,000 of these jobs would undoubtedly go to Illegals, as a recent Center for Immigration Studies report has shown.
The good news is that the House version of this Bill has a provision requiring contractors to use the E-Verify system which would let employers ascertain whether their workers were authorized to work in the U.S. The bad news is that the Obama Administration has delayed implementation of E-Verify for government contractors, presumably to allow time for them to cram their planned Illegal Alien Amnesty Bill down the throats of the American People in a few weeks.
The really important thing to remember about jobs and “job creation” is that government cannot create jobs.
period.
All they can do is take resources from one area, which takes jobs away – and give them to another area.
Or, they can give the illusion of creating new jobs by borrowing trillions more from foreign countries to pay for it.
Then, in the long run it destroys jobs, and makes life for the next generation even harder.
SPOONERITE !! what do you mean the govt doesn’t create jobs !? that is rediculous , what is the defence dept , the post office, my god man … of course they created jobs , whats the miiatary and all the civil service jobs ??? are ya kiddin me ? I hope no one fell for this hogwash , boy if they did people are really stuck on stupid ! the government is the biggest employer of jobs ! duh !
Andy , you fool no one , YOU STAY AND WORK FOR THE GOVT FOR ONE AND ONLY ONE REASON — it pays good , its stable , and it has great benifits , AND TO WORK IN THE COPRORATE WORLD IS MUCH MORE RISKIER , VERY UNSTABLE , AND THEY SCREW THEIR WORKERS . , and it is very hard to get layed off or fired from a govt position . You don’t fool anyone not even yourself. but hey no one is downing you for covering your own butt we would do the same . its all good. But we aren’t stupid either .
Spoonerite is actually correct in some ways on this issue, Ruth, and so are you. I don’t know if the proper point was made clearly though.
Like you’ve said, there’s millions of people employed by the government. But, it’s a fallacy to automatically assume that without the government these same people wouldn’t find productive work elsewhere.
Government projects may create jobs, but the real important question is, do they create wealth?
While employment is a huge necessity, employment alone isn’t the proper indicator of economic success; overall wealth is.
The government could easily reduce unemployment to 0% by mandating that every unemployed citizen shovel dirt on some government project.
Even if government spending can “create jobs,” creating jobs alone does nothing for our overall prosperity or standard of living.
When government spends money, it simply takes that money from one place (taxpayers) and moves it to another (state employees, roads, etc.).
Governments really have just three basic methods to pay for jobs:
1. They raise it through taxation.
2. They create money out of thin air.
3. They sell bonds on the open market.
This is not increasing wealth. It’s simply moving wealth from one area to another – and the sad part is that it often times reduces the country’s standard of living over time.
Increased taxes are a burden on everyone, and more debt or new money (inflation) hurts future generations more and more every year.
As Henry Hazlitt so eloquently explained in chapter 5 of Economics in One Lesson:
“Government employment programs can only create some jobs by destroying others, and government attempts to protect some jobs can only succeed if the government sacrifices other jobs. In both cases, these interventions make us poorer.”
What we need are jobs that are productive. We need to spend less, save more, stop the inflation, and start making things in this country again.
My primary question to you, Ruth, is this:
What do you do when the government is broke – like it is now?
Michael , I beleive everything you psoted to me to be true , except the fact that spoonerite was correct is nstating the govt does not create jobs …. as you mentioned ..it does . so its like being a little bit pregnant … that is impossible ! you are or you are not. the govt creates jobs or it doesn’t. I think if we added the liars ,cheats , and the corruption to the index table here , we can easily discover why we are in the mess we are in. There are MANY factors leading this fiasco , but the greatest is not incompetence ( as they would like us to believe it is an agenda ) an agenda that has lead us to where we ae and will continue to do so untill the sheeples learn to connect the dots .
If I build a bridge in Iraq after bombing and destroying another one, have I created a new bridge, or just replaced a different one?
I guess if you just look at the short term effect on one segment, and ignore the destruction that was caused first, a new bridge has been created.
But, if you look long term over a wider area, the net change in # of bridges is zero. And overall, it’s actually a loss, because new resources need to be taken to first destroy the old one, then more are taken to build the new one.
Kevin , excellent point of view on the bridges analysis.
Guierellmo , excellent comment and the best advice I have seen all day !! I do not own a TV , and I certainly wouldn’t pay some company like cable to propagandize me or my famiy !
Don’t be attached to what you are leaving behind.
if your poor and living in the streets or live in a crap environment think about all that put you there. And who’s fault is it, your because you didn’t try and why should we just shovel them money when they haven’t done anything but sit on their behind and drink and do drugs and the crap that plagues our country.
This “stimulus” is not wealth production. This is wealth consumption. It is nothing more than a massive spending bill. Maybe you like the things they spend on, maybe not. But that doesn’t change the fact that it’s consumption and not “investment” as the politicians call it. After 8 years of lying, warmongering Clinton, and another 8 years of lying, warmongering Bush, why do people even trust this criminal government anymore? It’s beyond me.
Do enough of this nonsense and you can destroy the livelihoods of an entire generation.
Dave there might be a rare few that beleive the govt , I and most are not one of them , the problem is there is nothing you can do about it anyways . bleive me we have tried . I think they know we don’t beleive a word they say ,but they don’t care what we think. basically there has been a coup and here we are , for now anyways I think the country is gone and I am not sure we can get it back.
I hear all kinds of people talk about how they just don’t trust the government, especially after all we’ve been through over the past decade or two. So Ruth, like you, I don’t trust them either.
So it really amazes me when these same people believe in the idea that government can help the economy. Of course, if I buy a honda civic for $100,000, I succeeded in buying the car. But, did i do it economically, was I efficient, did I waste?
That’s what the government does when it “creates jobs” It wastes, it takes from more productive areas, and it puts the bills on future generations. And that’s just morally wrong.
If these wealthy/greedy venture capitalists, hedge fund CEOs, etc. really want unfettered capitalism to run its course, then we should give them what they deserve by reniging the bailout. Even if it hurts us too, it may hopefully teach THEM a lesson, since they think its THEIR government and not ours. Its just a temporary fix, anyway, since big government is in COLLUSION with corporate america. You can’t expect facists like Limbaugh and Hannity (with their $50 million and $20 million annual salaries) to have any sympathy for the rest of us, because they have no concept of what its like to financially struggle! I almost barfed the other day when Glen Beck implied that inner city people in the northeast were “enslaving themselves to socialism”. Someone needs to tell these self-righteous elitists that there is a big difference between a democrat and a socialist. Not to mention that america is enslaving the Iraqi people in capitalism. They don’t want it! Why do we insist on forcing our culture and free market system on everyone like we did when we disenfrancised native americans, because we think the whole world should have it? It doesn’t work for everyone! They think socialism is inherently evil, because they fear what they don’t understand (or anyone who thinks or even looks differently than they do). I’d still prefer capitalism over socialism if we weren’t in bondage to the banking and lending institutions. However, history tells us that neither system seems to be better than the other.
Robert, you make a very important point here. The proper response to economic and financial incompetence should not be to prop up and subsidize error, greed, and corruption.
The only way out of this mess is to reorganize the economy – and that starts with allowing those failing corporations to go bankrupt, or completely out of business. Then – all those resources (labor, land, capital) can be purchased by new people, to use properly or fail.
But of course, the politicians and their corporate buddies aren’t interested in this kind of failure….that would be a revolution against their control over our economy.
Capitalism without bankruptcy is like Christianity without hell.
Robert , your right on the money with the term “collusion with coprporations” YUP , it corportocracy ,,the best democracy money can buy !
#33: Alan Tran
My original reference is now a broken link, so for now all I have is this:
http://www.propublica.org/article/flawed-sec-program-failed-to-rein-in-investment-banks-101
I’ll find something better and report back.
Also, the FDIC on the decision (though they don’t specify any new ratio requirement at all):
http://www.fdic.gov/news/news/press/2005/pr3305.html
here it is:
http://www.nytimes.com/2008/10/03/business/03sec.html
Hey River, thanks for the links and the follow up on this article….got some readin’ to do! Looking forward to seeing your perspective on some other posts around here too!
You guys will love the revised leveraging numbers I just came across. It seems that the 33:1 ratio was indeed just the top-end (Bear Stearns) back when I was first reading about this, and not a policy rule as I had originally gleaned.
CitiBank is currently at 56:1 (up to 280:1 if you include off-book liabilities!)
Bank of America is at 38:1
http://optionarmageddon.ml-implode.com/2008/11/24/leverage-by-the-numbers/
To be fair, this partially is due not to realized losses, but to mark-to-market accounting; recording debt based on current-market value, even if you’re not actually planning on selling the asset any time soon.
http://en.wikipedia.org/wiki/Mark_to_market
Wow, that’s just jaw-dropping, river. Glad you came back with a follow up on that. Even if it were just 33, it would be far too massive. Hope to see you on some other posts around here soon!
So many have said that Larken’s piece is ludicrous. And I agree to a point, however, from my view he was demonstrating how ludicrous the bailouts are.
I didn’t see it mentioned but I watched a Senate hearing on C-Span two or three weeks ago, where the subject was the $300 Billion bailout for 400,000 homeowners approved last April.
I had divided $300 Billion by 400,000 and the result revealed to me that if 400,000 were helped and the total $300 Billion were spent, then it would cost the taxpayer $750,000 for every mortgage saved. If less than that were saved, and the entire amount spent, it would cost more than $750,000 for each mortgage saved.
So I wrote an article about it on this blog.
Well anyway in this Senate hearing, the question was asked “How many mortgages have been saved by this bailout since April. The answer was 13.
I figured that $300 Billion @ 5% Interest for one year would yield $15 Billion of earned interest. So if my math doesn’t fail me
the cost of bailing out those 13 mortgages exceeded a Billion each ( that’s 1,000 Million ).
See Larken’s story isn’t so lubricious after all. Because what I have reported here has actually happened. It is not speculation.
Cliff Carson: do you have a reference to how much of the allocated $300B was actually spent, or a link RE: the 13 homes saved?
I can’t find any good references. Thanks!
I wonder if we’re going to see “mother of all bailouts” version’s 2, 3, and 4 coming out of the Obama administration. all they know how to do is borrow and spend – way beyond our means, and it’s not going to fix anything. So, will they add a few trillion next year?
River-Wind. Sorry to be so late to respond. I too have looked for articles. None to be found. But I did see the Senate Hearing on C-Span. I’ll look and see if I wrote anything down that might show the when, I will let you know.
http://dailyme.com/story/2009020300005359/
River-Wind. Here is a story about it. In this story the number of loans closed is 25.
River Wind-I pasted you a link about the $300 Billion Bailout.
Thank you, Cliff Carson. I’ve taken a look at that article and a few others based on some further searching.
The reality does seem to be that the program was a failure so far, though the good news is that by failing, it hasn’t used much of its $300M budget yet. I have not, however, found any estimates of how much *has* been spent, to get a better feel for the actual dollar/mortgage ratio at this time.
I believe every government program to be a failure no matter what the economic result. why? because to make one company or one group more profitable, they have to take that same money from someone else.
I call that stealing.
River-Wind. What got my attention was that the interest on the $300 billion for the year the money was allocated would amount to around $15 Billion. Someone is raking that in.
And just as bad is that if the 400,000 mortgages had been saved at the cost of the $300 Billion the cost would have been $750,000 for each saved mortgage!!!
That’s obscene. Those people ought to go to jail.
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