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* - galaxy


Posted on 2008.09.22 at 14:02
why will the ONE TRILLION $ bail-out plan FAIL and help destroy our economy?

to help pull the econ out of the great depression, FDR, among other things, created Fannie May and (later) Freddie Mac, (henceforth to be called "Fannie/Mac"). these, with the Resolution Trust Organization, helped back loans, mortgages, and investments that were going bad due to the snowballing lack of confidence and income in the economy. they were NATIONAL agencies. but in order to help pay for the Vietnam War, Lyndon Johnson DE-nationalized them by making them private, or quasi-private (like the Fed), corporations - where shareholders could put money into them (by buying them). to keep pushing up the value of Fanny/Mac's stock, to pay out better and better dividends, to satisfy and induce clients (banks), and to increase salaries of board members and executives, these F/M-backed mortgages owned by banks (which were still being paid off by homeowners) were allowed by F/M to be SOLD by the banks to the investment banks, finance corporations and hedge funds - as well as to China, etc. - which had ballooned during these last three decades of Republican rule. These mortgages were bundled up into packages of $250,000, $500,000, and upwards, which meant they could legally be used by the finance groups to "back" securities, or INVESTMENTS on wall st., at ridiculous leverage - where, e.g., $1 of ("homeowner"-owed) mortgage would not only be treated as one ACTUAL dollar, but would back (or insure) $10, $20, etc., worth of securities. Securities are GAMBLES. Especially when they themselves can be bought up AGAIN and again by other groups, (or by short-sellers), at even crazier rates. So the risk-taking groups (and even banks) who end up owning these mortgages NEED to have the extra capital around to pay when the risks fail - and if they DON'T, then they need to squeeze more money out of the mortgages, either by buying more and more mortgages, or by getting the banks to raise mortgage interest rates - thus forcing people out of their homes. When people defaulted on their mortgages, that rendered all the securities/investments extremely weak if not failed, and that sent wall st., and so business, into a shock.

Why was this allowed to happen? Well - Reagan's "SUPPLY SIDE" economics believed that wealth could be created simply through the financial manipulation of money - as in a PONZI scheme of supposedly infinite(-risk) investment, and then in the belief that government DEFICITS were both economically and POLITICALLY good, the latter because they could be shackled onto incoming Democratic administrations. That's what they did to Clinton. Clinton, however, managed to remove the deficit and BALANCE the budget, (actually gave it a surplus). How did Clinton do this? Partly by reducing the wealth of the common citizenry by allowing overseas flight of our corporations, and by eliminating welfare, etc. AND/BUT, he also balanced the budget by the Fed Chairman Alan Greenspan keeping interest rates artificially low. Thus US dollars wanted to stay and invest in the US, meaning the dollar was STRONG, and could buy things from overseas REALLY CHEAP. Since it was worth more, it was easy to pay down the deficit.

 Another major reason this was allowed to happen was that DEREGULATOR McCain's present economic advisor, Phil Graham, set in motion the "Enron Loophole" in 1999, which totally freed up current insane levels of investment leveraging. And even though regulations against "naked short-selling" exist, they have not been enforced, because Republicans have packed the positions of power, including those in the JUSTICE DEPARTMENT.

 But, do you see? All of this has been an evasion of the REAL costs of the Vietnam War - which were basically a WASTE of resources and productivity. It has been a growing encouragement of BORROWING over real productive wealth. The true FUNDAMENTALS of economy are MANUFACTURING/information, WILLFUL LABOUR, INFRASTRUCTURE, and GOOD FAITH AND TRUST. These are our true CAPITAL. Money is no more than a VEHICLE for the manifestation and transformations of these phenomena. Money is not capital per se. So when supply-siders convinced us all to invest in BORROWING and INVESTING - and borrowing to invest and vice versa - they were basically asking us to addict ourselves away from economic food into economic cocaine, crack, etc., so that the whole economy became a huge balloon of self-serving ego and UNTENABLE RISK.

It is true that capital, or wealth, is also created when a bank loans out money, and then declares that loan as a kind of CASH which it can invest or sell to make a profit. When the customer has paid off the loan, the bank (and others) has made additional money in the mean time. But that is only true to the extent that the rate of overall profit from such loans/investments does not exceed the overall TRUE rate of TRUE capital growth rate in the overall economy, which is based and valued in the CITIZENRY. Because that form of money-making is no more than a REFLEXION of the general growing public CONFIDENCE in the economy, which is played very close to the vest by INDIVIDUALS who privately experience and create wealth, or the lack thereof, and share those values in community. Further, that form of money-making, which is called USARY, where individual control is being used or diverted to some degree, must only be a temporary facilitation of both the interests of the individual and the bank or public/business entities. It CANNOT be something that is bundled and sold and sold and bundled into riskier and riskier gambles, which are further and further MIMICRIES of money-making, and indeed have virtually nothing to do with the actual creation of value or wealth or TRUE CAPITAL.
So, you see, as value has been evapouring from our economy, a plethora of false-fixes has conspired to replace it. For example, banks have been charging small customers and endless number of new and ridiculous fees. For example, governments and police departments attempt to make more money off of people by trying to outlaw almost every nuance of freedom. Taxes want to go up. Politicians say they won't raise them, but they either do, or they borrow more money to invest in empowering a further-snowballing of the dead-end WAR ECONOMY. Triple-A rated government bonds are sold to China, which has consumed much of our manufacturing wealth, while the power of our economy implodes, and the ratings drop. Other nations want to cash in and opt out. The dollar soon weakens. It will all eventually end very badly. I won't go into that now.

All I want to say now is that the $700 billion bail-out of failed securities is bogus. It won't work. It is more of the same - manipulating money and not CURING THE ACTUAL ECONOMY. The government will be unable to sell those securities and recoup the cost, largely because the economy will soon be in even worse shape, if only because of the "psychological" momentum in the economy.

ok - i want you to think about this bail-out and what it means and why it won't work, and i will write again about it soon.
 i would advocate the government refinance, pay-off, etc., actual mortgages above all else.
note that when republicans complain that the government's take-over of Fanny/Mac is “SOCIALISM”, remember that F/M is only being RE-nationalized, returned to their original configuration. all the failure occurred DUE TO THEIR PRIVATISATION. which was pushed by the supply-sider parasites, who were only after their own enhancement of wealth.

we are now faced with two choices:

depression or fascism - more on this theme in another post ...  AND THIS:

everything we are experiencing now, and will be experiencing soon, is what the people of Germany went through during the rise of the NAZIs.   ...  IN NEXT POST...


where hypotheses come to die
madman101 at 2008-10-01 23:50 (UTC) (Lien)
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