Thursday, October 2, 2008

Who is at Fault?

We know who loses: us.

Why Bailouts will fail.

They MUST raise interest rates, have the depression, and clean out (DESTROY) the fictive values. The fraudulent assets must be cleaned out of the system. Until the relevant players (and the people, who benefited, in a twisted sense, from the wastrel whirlwind of debt-driven spending) are able to come to gripswith this, and act resolutely though painfully, there can be no recovery.

This lesson is necessary for the moral revivification of the American people. They cannot continue to pretend they didn't have a role in this. The drugaddicts (borrowers), as well as the drug suppliers (banks, lenders, WallStreet), and the enablers (government, regulators who didn't regulate) too, areall at fault.
So what happened? Where did this "bubble" come from?

They packaged and repackaged debt, mostly bad debt, often from artificially low interest rates to increase housing demand. There was no oversight as to whom or where the loans were going or any care whether these would be able to be paid back. Then these debts were bundled, sold, and resold again at higher and higher values.

Idiots figured that housing markets would increase indefinitely, but as we've discussed, that is impossible. The shrewd (and/or evil, lustful, greedy) knew that with a corrupt administration in the white house they could do this all day long and at the end of the day, their losses would be covered by you and me. Glad I could help out.

[Something tells me that the timing of this was intentional - if the panic comes in the next administration, you think they would all have such cushy landings? Perhaps, I'm naive. I, at least for the time being, still have an inkling of hope to clutch.]

But, similar to what I wrote yesterday, that to create economic value, i.e. growth, something has to be created/improved/developed. That is the only way to create a bigger piece of the pie. The financial industry, (the business degree grads that I graduated with that I ridicule that all they do is push paper around) didn't create anything new. They didn't increase the size of the economic pie.

The financial industry took from one piece (the debt) and sold it off as something new to increase their share. Now that void has to be filled by something: our tax dollars from here to beyond. No new pie, just wealth reallocation upwards. And, that's okay, because it's not downward and that is a dirty word. Just ask Rush Limbaugh, that respectable fella. It's a ponzi scheme.

If I, or more plausibly, a 12-year old asian kid in the Portland area, were to invent a new, more efficient solar panel, that's a bigger piece of the pie. He and his family will make money and the world will benefit. That's how the system is supposed to work.

But, at the end of the day, if you didn't realize who "elected" officials represent, you should know now. One group had to lose. Taxpayers or the top 1%.

Another Article: Bailout Fallout will be delayed until 2010

Democratic and Republican Senators this week acknowledged they are weighing the longer-term political risks of a plan to save the economy from a Great Depression-style collapse.

So they chose self-preservation over common sense.

Likewise, they concede that it likely will take some time for any rescue plan to play out, perhaps months or years after the Bush administration has turned off the lights. "This thing has tails, for sure," said one 2010 Republican Senator speaking on the condition of anonymity. "There’s no question it spills over. Many of us were glad we weren’t on the ballot in 2006, and that we weren’t this year. But there’s a lot of issues out there that could come into play."
[Translation: Not my problem.]

"You got to think about the gravity of the moment — it’s a financial 9/11," he said. "The risks of not doing anything are far greater, politically and otherwise."

Sooooooo, there are only two choices? Talk about the utilization of fear. Handout or Depression? I think not my friend.

I'm pretty sure we've chronicled extensively about the successful Scandinavian plan AND how the Swedish were telling anybody that would listen how to do it.