It seems like Paulson and Bernanke together with their partners in crime Pelosi, Reid, Frank, Dodd and Schumer have successfully arranged the biggest single wealth transfer from the people of the U.S. to the very rich.
Obama and McCain stand by to laud that feat.
A few weeks ago the economic problems were ‘contained’, the banking system ‘sound’. Now the same folks who over the years produced the crisis suddenly scream "Depression!" and claim to have found the only solution: "Give me your money!!!"
This is by far not depression territory – yet. But Congress is following Bush in doing the best possible to get the U.S. there.
Most of the money that will go into the Paulson plan will be wasted to save some big bank shareholders. That money will be lacking when it will be needed for real programs that would make a difference.
From a guy who was right all along:
[I]n order to resolve this financial crisis it is
not enough to take the bad/toxic assets off the balance sheet of the
financial institutions (a new RTC); it is also necessary and
fundamental to reduce the debt overhang of millions of insolvent
households via a significant debt reduction on their mortgages (an HOLC
program like the one that was implement during the Great Depression);
and also recapitalize undercapitalized banks with public capital in the
form of preferred shares (as the RFC did with 4000 banks during the
Great Depression).An RTC scheme without an HOLC and RFC component would not resolve
two fundamental problems: millions of households are insolvent and
unable to service their mortgages; the financial system is vastly
undercapitalized and needs capital to avoid an ugly credit crunch and
to foster new credit creation that is needed for future growth.
With $700 billion wasted for the Paulson plan, likely borrowed from China by selling out
Taiwan, where will the money come from to get the other programs going?
What else is for sale? Would Russia buy back Alaska? Sarah Palin should
ask for an offer.
GE just cut
its profit forecast. 50% of GE’s earnings come from its financial
business arm. That part is likely to look no better than Washington
Mutual which will go belly up
on Friday, if not earlier. It then will be split up and the taxpayer
will be made to eat the bad parts while some rich folks will feast on
the valuable ones.
The German foreign minister and the finance minister currently have fun saying ‘I told you so’:
Frank-Walter Steinmeier said during a visit to the U.S. Stock Exchange
that Germany, Europe’s biggest economy, had run into a brick wall when
it called for more checks on international finance.‘I must say that we, and the finance minister (Peer Steinbrueck) in
particular, were right in the recommendations that we have been making
for two years,’ he told reporters on Wall Street.
and
"The U.S. will lose its status as the superpower of the global
financial system, not abruptly but it will erode," Finance Minister
Peer Steinbrueck told the lower house of Germany’s parliament in
Berlin, according to published reports. "The global financial system
will become more multi-polar."Steinbrueck criticized the United States for failing to adequately
regulate investment banks and said free-market policies embraced by the
United States and Great Britain that emphasized a short-term "insane
drive for higher and higher profits" were partly to blame for the
crisis.
Both
are right and both should shut up. Such talk only provokes anger.
Germany will be hit hard too. Not as hard as the US, the UK and the
neo-liberal eastern European economies but for a big exporter like
Germany a recession is unavoidable under these circumstances.
But Germany is unlikely to see violent protests over the downturn or any measures like these:
"The
next emergency measure will be that Americans are not allowed to buy
foreign currency and transfer money overseas, and the next measure will
be not permitting Americans to buy gold and so on and so forth…. It
creates even more uncertainty in the market place when you continually
change the rules," Faber said.
Faber’s assumption is
that the U.S. will massively inflate and U.S. people will try to hold
their money in other currencies. Then currency controls will be needed
to stop the capital outflow. He is right, so prepare yourself.
Stephen Colbert yesterday tried to explain how much $700 billion is. The easiest way, he said, is to think of it as 1 Euro.
That wasn’t funny.