What we have before us now is a systematic redistribution from the prudent and the responsible to the imprudent and the irresponsible.
Amid the astonishing details of the Fed’s fierce money pumping, the Treasury’s partial nationalization of the banking industry, and the madcap exchange of its legal tender for the banks’ rotten mortgage-backed securities, we may lose sight of the overall character of these actions: they are, in effect, nothing short of a gigantic armed robbery.
Any armed robbery, of course, has two sides: on one side is the party who takes property by threatening violence against its legitimate possessor, and on the other side is the party who loses property by yielding to this threat. Such “redistribution of wealth” is bad enough on its face, but in the present case its related aspects render it even more obnoxious.
What we have before us now is a systematic redistribution from the prudent and the responsible to the imprudent and the irresponsible. Did you make your mortgage payments in full when they were due? Were you careful to avoid investing in incomprehensible derivatives whose failure might lead to your bankruptcy? Very good, sir: you are therefore entitled to relinquish substantial amounts of your wealth, either directly through ordinary taxation or indirectly through the “inflation tax” and the diffuse effects of “crowding out” in the loanable-funds market, where the government must soon borrow hundreds of billions of dollars more than expected a few months ago.
But not to worry, because your injuries are simultaneously the means by which those who failed to act with honesty and due diligence will be rewarded. You see, it all washes out, my dear Keynesians: we owe it to ourselves! (Full disclosure requires admission that the substantial gainers include not only undeserving Americans, but also, among others, Arab sheiks, the Bank of Japan, and the Bank of China, which own huge heaps of “agency debt,” especially the bonds of Fannie Mae and Freddie Mac. You may chalk these foreigners’ financial salvation up to the Bush administration’s own version of the Good Neighbor Policy.)
Moralists have much grist for their mill in these events. Economists will worry more about their incentive effects. One thing is certain: the government’s recent actions herald the ascendancy of its commitment to a policy of “too cozy to fail.” Are you from Goldman Sachs? Yes, well, then, here: take these billions. Yes, yes, don’t worry; it’s okay. We’ve got everything covered. Bank of America, here, you take some, too. Citigroup, here’s yours. Wells Fargo, Morgan Stanley, the line forms right here. Come along, my friends, time’s awastin’. And don’t worry about taking something that doesn’t belong to you. The president says “these efforts are designed to directly benefit the American people by stabilizing our overall financial system and helping our economy recover.”
How, exactly, will these dishonest enrichments give rise to those happy outcomes? What, as the pharmacologists say, is the mechanism of action? Well, the authorities haven’t spelled that out yet, but if you are a good American, you’ll happily trust them. After all, Henry Paulson and his friends have always proved themselves to be financial geniuses in the past, haven’t they? (Security, get that man out of here. Yes, that one, the one yelping about the parties responsible for this hideously tangled monkey business of mortgage-related securities, derivatives of derivatives, credit-default swaps, collateralized-debt obligations, and off-balance-sheet assets. And keep him out.)
Don’t let that troublemaker’s questions disturb you, gentlemen. Those complications are all ancient history now, and this is no time for finger-pointing. It’s imperative that we move on, and we’re simply going to cut through the Gordian knot you tied. We must act decisively before the entire world economy melts down or freezes up. (The Minister of Metaphors will determine which hyperbolic term will be officially adopted for use in our G-7 and G-20 communiqués.) Now, Bank of New York Mellon, JP Morgan Chase, fall in line. You, too, State Street. Step lively, gentlemen, and hold those purses open wide while I pour in the taxpayers’ money.
Although many details remain to be worked out, and the architects of the new financial order are drawing (and redrawing) their blueprint as the construction proceeds, the overall logic of the new structure has already become fairly clear. As best we can determine, the administration’s theory is that the economic well-being of Americans, and indeed of people around the world, cannot be achieved without resort to the grandissimo of all grand larcenies. Barbara Bush probably never dreamed what amazing things her rather dim-witted firstborn son would accomplish. By the time that all of these crimes have run their course, George Walker Bush may well have proved himself to be the greatest economic wrecker and looter in the history of the world.
Of course, he does not lack for willing hands to pitch in as he rips and tears his way through the fabric of economic life. Hank Paulson, Goldman Sachs, Morgan Stanley, and the rest of the big bankers, like the fabled Tammany Hall boss George Washington Plunkitt, have seen their chances and they took ‘em. At the Fed, Ben Bernanke is snatching new powers for the central bank (and hence for himself) as if there were no tomorrow, and using them just as rashly. Is there a problem? Enormous effusions of new central-bank credit will cure it. Inflation? Don’t worry about that: it won’t show up in full force until the day after tomorrow. Members of Congress also love the new financial regime. Anything that puts more money and power at the government’s disposal means that the solons will have more promises to sell in their future backroom deals. So, in short, everybody who counts is deliriously pleased with the recent turn of events. If they say they’re not happy, it’s only a pose, and for these professional posers and fakers, nothing comes easier than lying, stealing, and cheating. In truth, they are now reveling in their very heaven, as the power elite always is during a crisis, even a crisis as bogus as the present one.
The great mass of the people, of course, are somewhat less happy. Many are, as usual, simply bewildered by what’s going on, and frightened by the panic they see on display in the news media. Others, however, are actually angry, because this time they have seen through their rulers’ gossamer rationales, and they realize that they, as well as their children and their grandchildren, are being impoverished in order to pass hundreds of billions of dollars along to the incompetent, dishonest, undeserving, yet politically potent, masters of high finance.
First published by the Independent Institute. Republished with permission.
Robert, read the Power Elite. It was written by C. Wright Mills, Oxford Press 1956. I may still have a copy in my library. This book, like Ayn Rand’s writings, foretold our situation today…and we failed to take responsible action.
But wait, after November more will be taken from the responsible high achievers until they decide to stop achieving and let the hangers on fall on to hard times where they will need to take care of themselves and thus fail.
As usual with Higgs, the libertarian or conservative message is lost at the last minute in personal vendettas and Marxian class struggle ideals. I can’t figure this guy out for the life of me. He’s always got me this close to on his side, and then wanders off into looney “Bush is Hitler” land and starts in about the proletariat and the evil corporate henchmen of capitalism. Does he oppose this bailout because it is bad economic policy that will fuel inflation, increase our national defecits, prolong a recession and prevent a recovery like the New Deal? Or does he oppose it because he believes it to be an evil and deliberate Bush administration scheme to rob the public and funnel money to those damn, dirty, Bush-crony fat cats in banking? It’s hard to say. But given the “independent” institute’s penchant for supporting ideas and authors that teeter right on the edge of Bush Derangement Syndrome conspiracy theories, I always have my suspicions.
All they are doing is letting the air out of the balloon slowly. It is very old, brittle and held together with scotch tape, typewriter film ribbons from numerous IBM Selectrics, and chewing gum. If you let the air out all at once, it pops and rains down on everyones head like a flaming tickertape parade in dry brush country.
And I have read the Power Elite too. It forgot to take one thing into account. Those in power are only in power because people, the masses, pay attention to them. The Power Elite rules with fear and I’m sorry but that dog may still have some bark but the teeth have long since rotted away from poor diet and the dog is so out of shape it cannot even get out of the truck on it’s own power. The middle class was the backbone of this country and it has been decimated.
I was born on August 18, 1965. Every day that I have been alive has been the worst day of American history. Since every day, things are a little meaner, a little more messed up and further off of the path of just simply being a decent well regarded nation. The big difference between now and 1929 is that now, the majority of those hit hard by this, are college educated. Another big difference. The rest of the world, that is those that do not reside here CONUS, outnumber us by a great, great many. Sooner or later they are going to realize that the needs of the many outweigh the needs of the few and at that time we had better have a reason to justify our existence or maybe the world will just put trade restrictions on us and embargos and let us stew in our own juices for 20 or so years.
Let’s be honest here. What do we have? What can we produce? or What can we do that would make us, as a nation, a valuable asset on the world stage so as not be seen as a liability anymore? The only thing I have seen us doing in my time here is talking alot and being in one conflict after another. Sooner or later playground rules come into the picture and the bully is sent home and everyone has a much better day.
Since we are looking at things as problem, reaction, solution, does it not make sense that the rest of the world is thinking along those same lines also?
A majority of the world sees us, Americans, as the problem. Who cares what the polls say for the canidates. What do the world polls say for us? How big of an approval rating would America get? We truly have led the world, that’s about 6 billion plus, that followed us, 300 and some odd million, into a very deep, dark and dank cave.
Now who do you think stands a better chance of making nice with 6 billion people?
I’d go with the guy that doesn’t look like a balding, constipated version of Uncle Sam without the cool hat.
http://www.waynesdrainsmontana.com
My question to the author is, what do you propose we do about it? Are you in favor of rescinding the bill? This $700 bn bailout CAN and should be appealed, and overruled. Why don’t they put THIS to the vote of all of America? Enough with bailout out the incompetent, whichever industry they are in. It is government intervention that got us into this mess, and it’s government intervention itself that ought to fail. Get rid of the tariffs, quotas and subsidies. Get rid of the pork spending all over the map. Privatize where appropriate. Government’s job is not to create jobs, but to provide a peaceful law-abiding nation where individuals can trade with each other their time and money and skills. The welfare society is supporting a lot of unproductive filler, people whose job at best is to get in the way.
Wayne, come back to reality. Who cares what the rest of the world thinks? Facts are that the U.S. could “stew in its own juices for 20 years” with no problem. In fact it would save us a great deal of money wasted on other country’s citizens.
How could we possibly stand on our own you ask? By closing our borders, removing all illegals, and beginning manufacturing again in the U.S. We have huge energy deposits that can be exploited, other great natural resources, and an educated population.
To the rest of the world…KMA!
America has actually been a bit of a bully, but I think it’s time it stopped. Closing borders isn’t necessary. Get government out of the economy. The point about America was supposed to be that it embraced capitalism. Well, it’s time to re-embrace capitalism. Stand up for what America USED to mean, and make it mean that again. I do agree, Mickey, that “who cares what others think” is a valid concept to a certain extent. But it only works when you are embracing the just, the true and the good. In the arena of human interaction, the GOOD is banning coercion and the initiation of force. There’s plenty of that for realz, you know. And most of it would evaporate if people felt that they really had true freedom. Not absolute freedom, but real freedom, with defensible boundaries.
Mickey, You don’t actually believe that do you?
A very wise man once told me that it is not so important what you think of yourself, but how others see you and what others belive you to stand for. And yes it is a valid concept of “Not caring what others think”, when you are in 8th grade embarassed to wear the jeans that aren’t “In”. But later, when you are an adult, you realize that how people view you is directly related to what you say and how you act, it is very important.
“How could we possibly stand on our own you ask?”, I never asked that. You asked that, so in answer to your question. How can we stand alone? Good question. It would be really nice to be able to flip a switch and return this country to being an agrarian/industrial nation that was sustainable instead of a consumer/service driven society which is not. To undo 71 years of this failed economic experiment is not going to happen overnight, if ever. You forget this nation is only 232 years old. We are still in diapers.
“By closing our borders, removing all illegals, and beginning manufacturing again in the U.S. We have huge energy deposits that can be exploited, other great natural resources, and an educated population”
Really? huge energy deposits? That can be exploited. You’re not talking about the Bakken oil shale fields in the Dakotas and Western Montana are you? Or maybe the ANWR fields that BP horizontal drilled in the 80s and 90s? The Bakken has about a -17 to 1 C.O.P. ratio, ANWR is dry. Simply put you cannot use fossil fuels to get fossil fuels, sooner or later the perpetual motion machine grinds to a halt. Sure there are some massive fields deep underwater. Problem is we can’t get it up from that depth in any useable quantity. Counting reserves proved predicated upon technology being created in the future to extract it was a very foolish notion indeed.
Closing the borders and removing all the illegals sounds nice, who is gonna pay for the fuel to get them back to wherever they came from? Beginning manufacturing again?
Maybe that is why Mattel and Hasbro shut down and detooled their Chinese factories so they can come back here and set up shop, again.
All of those ideas Mickey require something that we have very, very little of. Which is capital and credibility and we will have less and less capital as the weeks and months go by. Which ties into Amai’s thing about re-embracing capitalism. We have not been a capitalist society since 1913. We were a hybrid socialistic democracy with capitalistic leanings. The capitalistic leanings were concentrating the wealth and power in the hands of a few.
I don’t know what we are now. But I have a feeling that when the rich get richer and poor get poorer the situation will naturally resolve itself to the point where no one has anything, which has already started.
cheers
Wayne,
It’s a bit ironic reading about how irrelevant the United States is in the global economy when our markets lose 10% of the their value and every major market in the world loses 30%. We’ve got an interconnected system of very developed countries that are utterly dependent upon one another. China needs somebody to buy billions of dollars worth of 1.3 cent-per-unit toys and electronics and textiles, and India needs somebody to direct their customer service telephone calls to their 2 dollar per hour phone banks, and Colombia needs somebody to import their 4 dollar per bushel produce, and Saudi Arabia needs someone with a disposable income and big engine to burn up their 80 dollar a barrel oil. Just like most of the globe needs American grain, American capital, American multinationals’ FDI, American military aid, American currency value (since half the world is pegged to the dollar), etc.
As far as our standing in the world: Do you really think brutal communist military dictatorship China is more well-regarded in the world? How about Islamic theocracy Saudi Arabia? How about quasi-communist, once-injured, and recently-aggressive Russia? Or drug cartel-controlled Mexico? Grow up. Commerce has as much to do with warm feelings for one another as your angsty adolescent babbling has to do with reality. If you want to go sob about the evils of capitalism and, like, how the United States is totally bad and stuff, you’ll probably find a more receptive audience at Daily Kos. Or your local Obama campaign offices.
Patrick, lets take a look at that shall we.
Actually all of those countries you named are currently held in higher regard than we are, by many, sad to say.
But those countries, especially China, are being seen as victims of this mess we have created.
It’s a bit ironic reading about how irrelevant the United States is in the global economy when our markets lose 10% of the their value and every major market in the world loses 30%. We’ve got an interconnected system of very developed countries that are utterly dependent upon one another. China needs somebody to buy billions of dollars worth of 1.3 cent-per-unit toys and electronics and textiles, and India needs somebody to direct their customer service telephone calls to their 2 dollar per hour phone banks, and Colombia needs somebody to import their 4 dollar per bushel produce, and Saudi Arabia needs someone with a disposable income and big engine to burn up their 80 dollar a barrel oil. Just like most of the globe needs American grain, American capital, American multinationals’ FDI, American military aid, American currency value (since half the world is pegged to the dollar), etc.
Nowhere near half my friend, at last check only 26 countries were pegged to the dollar with Columbia waffling about whether they would continue to stay pegged. 15 countries unpegged between Jan and May of this year.
We had a interconnected system, past tense on the system part, we are still connected, for now. Now you are correct that those countries needed us, but the highways are pretty quiet these days, the stores are pretty empty these days, and some of those call centers in India have filed suits against their Western contracts for breach.
OPEC is trying to figure out if raising the cost of oil will boost their bottom line, or will it just cause more people to drive less and overall lower their bottom line even further?
All those points you mentioned, that’s the way things were, not the way things are now. Now countries are beginning to re-evaluate their relationships with us. and there is no reason to hang out at Daily Kos or the local Obama office, most of those guys ‘get it’. Did you wonder why the G7, met as a G5, excluding US and British first?
“American capital, American multinationals’ FDI, American military aid, American currency value”
American capital – at one time was great now has been diminished exponentially.
American Multinationals, like AIG – I’ll just leave that one sitting there.
American Military Aid, oh yeah, that one really has gone over well. Seems people still remember quite vividly our American Military Aid. We call it aid, others call it something much different. American Currency Value? << You should have put a question mark after that one.
Want to see how popular we are, go to New Zealand, whip out a U.S. 20 and try and buy a beer, better yet, wear a USA proud shirt whilst trying to buy that beer. See what kinda reaction you get.
We gotta stop beliving our own press.
WayneSMT, having spent some time in Australia opening a casino and also visiting New Zealand I used local currency the same as I have done everywhere else in the world. I have always considered it an insult to use foreign currency in any country.
Seems to me that you should consider immigration to a country that more closely matches your globalist world view.
It is time for America to become an isolationist rather than globalist. Let the other countries stew in their own juices and see how well they do.
By the way I have worn my flag pin wherever I traveled and not encountered any issues that I could not comfortably handle. No issues at all in English speaking countries so I don’t get your New Zealand reference.
Wayne, would these many who view China, Saudi Arabia, Russia, and Mexico more favorably, also be the ones whose approval we should seek?
Another question, if we are so poorly viewed, why do so many people want to come and live in this country?
Anderson, your last line says it all and also leads to a need for us to make citizen status mean something.
Wayne,
26 countries pegged to the dollar still means a lot of fit hits the proverbial shan if the US dollar takes a dive. Currency collapse in 26 countries, plus the United States, would be an international disaster that stunted world commerce for decades. Now tell me again how inconsequential American currency is in the global financial scheme?
You missed the point entirely in your zealotry. Global players that command far less capital, resources, and influence in the markets than the United States are capable of causing enormous disruptions in the global economy. To say that the United States is of no consequence demonstrates your utter ignorance of global economics.
Besides your anecdotal babbling about how New Zealanders view American currency being passed in their local bars, and your projection of your irrational musings onto the population of the entire globe, I don’t really see much in the way of actual facts or evidence to support your conspiracy theorist pseudo-reality. Again I would note: even if the entire world absolutely loathed the United States, they still want to trade with us. They want to trade with anybody who can create value for their economy. At least they do if they are rational and not suicidal. Hence the dependence of the entire globe on oil from Islamic nutcases who want to blow them up (you may not have gotten the news down in your cave, or maybe the reception isn’t that good with your foil hat on, but even those European bastions of orgiastic love and understanding have been struck by Islamic terrorism, and rather recently at that). Or China’s thriving economy despite, say, the slaughter of peaceful Tibetan monks and the suppression of dissent in the form of, say, a massacre in Tiananmen Square. Again, commerce has nothing to do with warm feelings, even assuming that the rest of the world actually did share your irrational loathing of the United States. Take off the foil hat and take a class or something.