BLOGS

Notes and cases for:

Events and meetings

read the news, oh, boy

Links:
ecology
social justice
grassroots
peace/nonviolence

local area political directory

 

 

 

(10/03/08)

Mandated Sacrifices to the Financial Gods

On the day after the financial bailout went down in the US House, the President warned us again of the terrible economic catastrophe that may well over-take us if this bill doesn’t pass the upcoming time. ABC News treated us to still more explanations of what a credit crunch is and the effects that it has on our household budgets and on our families. John McCain suggested that we stop calling it a “bailout” and call it instead a “rescue package”, as if the problem
was that it hadn’t been marketed well, and that’s why so many of the people were opposed to their tax dollars going to save the bankers. (from themselves, mainly.)

And, now, four days after the cosmetically altered bailout went down in the House, it's been to the Senate where its size was altered at least 10 fold, and is coming up again in the house, no doubt with more cosmetic alterations. It should not pass; at the core of it, beyond the cosmetics, it's still the same extortion scheme, as it has been all along. The bankers can gamble away in the big casino we mistake for the whole economy, and when the game gets out of hand, the taxpayer is supposed to come along and make it alright again.

Yes, the credit crunch ABC News likes to explain is real, but it goes way beyond the bad mortgages we’ve been hearing so much about. The credit crunch is that the whole system is maxed out. The national debt is currently in excess of $9.8 trillion dollars, and if the Paulson plan is passed, it could grow well beyond that, requiring a fifth increase in the ceiling during the Bush administration. Of course, there is also corporate debt and consumer debt on top of that. Corporate default, according to Standard and Poor’s, is headed for a thirty year high, perhaps by 2010. Consumer bankruptcy is on the rise, despite the bankruptcy law and the changes in Chapter 7 filing. Health emergencies are the leading cause in half of them.

What we really have is a credit crunch within a credit crunch. The latter one being the quite scary situation in which we are “maxed out”, as in the movie by that title. The movie covers the bases, both in the sub-ethical practices of much of the finance industry and the truly staggering pile of debt we live under. If we do somehow manage to deal with the smaller credit crunch that's in the recent headlines, it will basically mean that the staggering pile of debt that governs so much of everyday life will simply continue to grow that much more
easily. That is, until it finally cannot do so.

To bailout the bankers without providing sufficient stimulus to the rest of the economy is an awesome error, and history will provide a judgment on that account. We’re told that, if we don’t pay off the bankers the country will slip into a severe recession, or we could just use the “d” word. However, if we do pay them off, and don’t do anything for the economy, it will all go on, for some indeterminate amount of time, quite possibly less than we think, until it become time to use the “b” word instead. Only, it will not be the bankruptcy of an ever increasing group of individuals, but of an entire country with outstanding debits and no longer able to qualify for any kind of loan. Bankruptcy may well be in our future anyway, if we don’t close some of those 700 and some odd foreign bases, cancel the weapons programs for stuff that we don’t even need, and get out of Iraq, thus saving the $10 billion a month we pay for just that. (and, if we don’t finally solve the ever growing health care crisis.) But, bankruptcy seems a sure bet, if we make the officially mandated sacrifice to the
financial gods, without working out a way to begin rebuilding our economy and our country.

In all probability the funds for the Paulson bailout would be borrowed,
which leads to an important question. Wouldn’t it make more sense, since apparently we still have one more time we can go somewhere else on the globe hat in hand to beg for yet another loan, to use it this time to create some value. That is, as opposed to destroying value. Using Paulson’s arbitrary back of an envelope figure, as somewhat better than nothing, we could do some wondrous things with it, certainly compared with saving the fortunes of some millionaire
bankers.

For purposes of illustration, we could take $150 billion or so and create a new deal/depression era Civilian Conservation Corps organization to hire blue, green, and white collar workers to fix some of the more glaring portions of our crumbling infrastructure. Another $150 billion could go to developing renewable energy, in anticipation of shortened supplies of fossil fuels and to lessen rapidly advancing climate change. At least $100 billion could go to beginning a process of re-industrializing the country, not just in assembly, but in advanced manufacturing, in such industries as energy R&D, environmental protection, hydrology, and nanotechnology. Then, there should be
an allocation of expanded funding on some basis to the education system, to set up programs to broaden the skill base to support the above, and for research in all three areas.

Of course, it’s no wonder that we’re already spent more than half. Much of this should have been started as long ago as three decades. In the late ‘70’s, in periodicals such as Design News, for example, there were articles on hybrid vehicles. The interest was there, but as soon as the Reagan administration came into power, the money quickly disappeared. We always seem to be able to subsidize what's already in place, and what has very large interest constellations to protect their right to raid the treasury, but authorize spending on the new, and someone will always squawk about how much it costs.

Before we begin using huge sums, like $700B, to appease high finance, we should look at what else we need to do to further economic recovery. It’s not just about credit. Some of it is about reducing our need for credit and reducing indebtedness. The Federal Government pays $300B/yr just in interest on the national debt. Every dollar not spent that way could be allocated to some other use. If we stopped pretending that the present financial emergency
was the whole picture and looked instead at the broader credit crunch, we could perhaps begin to dig our way out of the hole we’re in. If we just had enough people thinking of the whole, instead of how to maximize their own fortunes, and minding the store rather than playing in their own little sandboxes, we might, just might, be able get back to some sort of solvency again.

Comments and questions should be forwarded to
information