by Ismael Hossein-zadeh
Global Research, October 14, 2008
The sad and sick status of our public finance (the rising budget deficits, the soaring national debt, the curtailment of crucially important social spending, and the resulting neglect of both social and physical infrastructure) is a direct consequence of our warped fiscal policies that give priority to the interests of the super rich at the expense of everybody else. It is a direct result of the looting of our public money through a combination of (a) huge “supply-side” tax cuts for the wealthy, and (b) drastic increases in the share of military spending at the expense of non-military public spending.
In a real sense, even the current financial meltdown is a logical outcome of an economic philosophy that promotes extreme social inequality. Contrary to “expert” punditry and popular perceptions, it is not simply due to personal greed; more importantly, it is the result of a systemic failure, or the outcome of the diverging and conflicting class interests.
Progressive taxation, social spending, New Deal reforms, and the War on Poverty were designed not only to protect the poor and working people against the woes and vagaries of market mechanism, but also to save capitalism from itself. Instead of viewing public spending on social safety net programs as long-term investment in the future of the nation, trickle-down economic philosophy views such expenditures as overheads that need to be cut as much as possible.
To this effect, proponents of this philosophy have since the early 1980s been working very hard to cut taxes for the wealthy, to cut non-military public spending, and to reverse most of the social safety net programs that were put in place by FDR’s New Deal and LBJ’s War on Poverty.
Not surprisingly, the result has been an extreme concentration of national riches and resources in fewer and fewer hands, side-by-side with a steady deterioration of the living conditions of the overwhelming majority of our citizens. Unable to make ends meet, most of our citizens exceedingly resorted to borrowing.
Predatory lenders proved to be both creative and merciless in taking advantage of the economically vulnerable, or the legitimate aspirations and dreams of home-ownership. Unfettered by the irresponsible government deregulation policies, these rapacious lenders pushed loans, engaged in deceitful or fraudulent lending practices, and unscrupulously invented many shady financial instruments that resulted in the accumulation of massive amounts of fictitious assets that proved unviable, and eventually collapsed under their own dead weight.
Unless the lopsided national priorities and perverse fiscal policies, known as trickle down or neoliberal economics, which began under Ronald Reagan, are somewhat rectified or mitigated, and the resulting financial resources are invested through a broad and carefully-crafted plan of social and economic recovery, no bailout plan of the plutocrats, by the plutocrats, for the plutocrats can succeed in reversing the current cycle of economic decline.
Showing posts with label Fianancial De-regulation. Show all posts
Showing posts with label Fianancial De-regulation. Show all posts
Saturday, October 18, 2008
Saturday, September 27, 2008
Bailout Can't Hide It - The United States Is Broke
By Chris Powell
26/09/08 "Day Publishing" original HERE... -- - Even leading Republicans in Congress, including presidential nominee Sen. John McCain, recoiled from Treasury Secretary Henry M. Paulson's proposal to take absolute power over $700 billion to be borrowed by the federal government and used to purchase every sort of bad debt without ever having to answer for it - not to the courts, not to regulatory agencies, and only occasionally and incidentally to Congress itself.
The bad-debt bailout would be the biggest government patronage program in history and would amount to declaring martial law over the U.S. financial system and economy. Even if such martial law is necessary, its implementation should be put in democratic hands - a non-partisan agency with full transparency, statutory standards for its purchases, and close accountability to Congress.
All the same, even if it can work - that is, prop up insolvent financial institutions - the Treasury's proposal is still a proclamation of the collapse of the whole U.S. financial system. Even if some financial institutions are saved, the collapse will manifest itself in other ways, probably ways more damaging to the public. For who cares if Goldman Sachs and Morgan Stanley endure if the issuance of $700 billion more in government bonds drives interest rates way up, diverts credit from the private economy, devalues the already sinking dollar, and sends commodity prices soaring again?
In that case the financial class will have won another battle in its long war against the producing class. It will be again as was said about the maneuvers of the Second Bank of the United States two centuries ago: “The bank was saved; only the people were ruined.”
Injecting throughout the world financial system their bogus and unregulated financial instruments, like collateralized debt obligations and credit-default swaps, the big New York financial houses have taken the world economy hostage. The president and Congress should strive to save the hostages, not the kidnappers.
But the president and Congress have participated eagerly with the kidnappers in the total corruption of the financial system.
They have staffed the regulatory agencies largely from Wall Street and then diminished financial regulation.
They have let the financial houses finance presidential and congressional campaigns.
They have watched haplessly as accounting firms and credit-rating agencies engaged in conflict of interest and failed to do their jobs over and over again even as corporate scandal followed corporate scandal.
They have waged mistaken imperial war not with taxes but with huge amounts borrowed from abroad, making the country hostage to foreign nations, including some with hostile interests.
They have approved the government's falsification of inflation data and its surreptitious suppression of the price of gold so that interest rates could be set below the inflation rate, the government and everyone else could borrow more at lower interest, and the public would not become alarmed by monetary debasement.
Now the U.S. government is conjuring into existence via a few computer keystrokes fantastic, virtually inconceivable amounts of money. Unreal as these amounts are, they will be claims on the real goods and services of the country, and, if the rest of the world wants to keep playing along, which is doubtful, claims on the real goods and services of the rest of the world as well.
The purpose of all this will be to save the people who happen to be in charge of the payments system and to save the propertied class generally. But people without many assets, people who don't earn enough to own housing, people who could gain from lower housing prices and lower prices of everything else, are not even in the government's equation.
The country is simply busted. Its financial obligations are unpayable, its asset prices are illusions, and the great undertaking in Washington and New York is to preserve those illusions rather than face reality. If the price of preserving those illusions is $700 billion - and of course it is more likely to run into the trillions - could it really be more expensive to dispense with the illusions now? After all, instead of rescuing financial institutions that disregarded risk, the government just as easily could keep the country going by sending checks to everyone every month - as it already sends Social Security checks to retirees.
But as long as the government keeps paying ransom, the financial class will keep taking the country hostage.
NOTE:
I wish I could disagree with the author's assessment. Unfortunately, it is closer to reality than we might think. The real question is whether a bail-out/rescue plan will only delay the inevitable or allow enough time for a radical restructuring of the US financial system. The elite financial class will continue to resist any substantive changes as they hope to wring the last bit of potential profit out of a rapidly deteriorating system. They can then exit the country to more favorable off-shore locations as the implosion consumes those of us who lack the where-with-all to leave.
This is how morally and financially bankrupt over-extended empires are ultimately destroyed. The chickens of our profligate orgy are coming home to roost.
--Dr. J. P. Hubert
26/09/08 "Day Publishing" original HERE... -- - Even leading Republicans in Congress, including presidential nominee Sen. John McCain, recoiled from Treasury Secretary Henry M. Paulson's proposal to take absolute power over $700 billion to be borrowed by the federal government and used to purchase every sort of bad debt without ever having to answer for it - not to the courts, not to regulatory agencies, and only occasionally and incidentally to Congress itself.
The bad-debt bailout would be the biggest government patronage program in history and would amount to declaring martial law over the U.S. financial system and economy. Even if such martial law is necessary, its implementation should be put in democratic hands - a non-partisan agency with full transparency, statutory standards for its purchases, and close accountability to Congress.
All the same, even if it can work - that is, prop up insolvent financial institutions - the Treasury's proposal is still a proclamation of the collapse of the whole U.S. financial system. Even if some financial institutions are saved, the collapse will manifest itself in other ways, probably ways more damaging to the public. For who cares if Goldman Sachs and Morgan Stanley endure if the issuance of $700 billion more in government bonds drives interest rates way up, diverts credit from the private economy, devalues the already sinking dollar, and sends commodity prices soaring again?
In that case the financial class will have won another battle in its long war against the producing class. It will be again as was said about the maneuvers of the Second Bank of the United States two centuries ago: “The bank was saved; only the people were ruined.”
Injecting throughout the world financial system their bogus and unregulated financial instruments, like collateralized debt obligations and credit-default swaps, the big New York financial houses have taken the world economy hostage. The president and Congress should strive to save the hostages, not the kidnappers.
But the president and Congress have participated eagerly with the kidnappers in the total corruption of the financial system.
They have staffed the regulatory agencies largely from Wall Street and then diminished financial regulation.
They have let the financial houses finance presidential and congressional campaigns.
They have watched haplessly as accounting firms and credit-rating agencies engaged in conflict of interest and failed to do their jobs over and over again even as corporate scandal followed corporate scandal.
They have waged mistaken imperial war not with taxes but with huge amounts borrowed from abroad, making the country hostage to foreign nations, including some with hostile interests.
They have approved the government's falsification of inflation data and its surreptitious suppression of the price of gold so that interest rates could be set below the inflation rate, the government and everyone else could borrow more at lower interest, and the public would not become alarmed by monetary debasement.
Now the U.S. government is conjuring into existence via a few computer keystrokes fantastic, virtually inconceivable amounts of money. Unreal as these amounts are, they will be claims on the real goods and services of the country, and, if the rest of the world wants to keep playing along, which is doubtful, claims on the real goods and services of the rest of the world as well.
The purpose of all this will be to save the people who happen to be in charge of the payments system and to save the propertied class generally. But people without many assets, people who don't earn enough to own housing, people who could gain from lower housing prices and lower prices of everything else, are not even in the government's equation.
The country is simply busted. Its financial obligations are unpayable, its asset prices are illusions, and the great undertaking in Washington and New York is to preserve those illusions rather than face reality. If the price of preserving those illusions is $700 billion - and of course it is more likely to run into the trillions - could it really be more expensive to dispense with the illusions now? After all, instead of rescuing financial institutions that disregarded risk, the government just as easily could keep the country going by sending checks to everyone every month - as it already sends Social Security checks to retirees.
But as long as the government keeps paying ransom, the financial class will keep taking the country hostage.
NOTE:
I wish I could disagree with the author's assessment. Unfortunately, it is closer to reality than we might think. The real question is whether a bail-out/rescue plan will only delay the inevitable or allow enough time for a radical restructuring of the US financial system. The elite financial class will continue to resist any substantive changes as they hope to wring the last bit of potential profit out of a rapidly deteriorating system. They can then exit the country to more favorable off-shore locations as the implosion consumes those of us who lack the where-with-all to leave.
This is how morally and financially bankrupt over-extended empires are ultimately destroyed. The chickens of our profligate orgy are coming home to roost.
--Dr. J. P. Hubert
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