Archive for October, 2008

Return of Markets

October 13, 2008


Return of Markets

            Sure, sure, I’m an economist too.  Not only am I a writer, but here on this blog are words of wisdom to solve the Financial Crisis.  I hope.  But more than that.  I don’t like the doom and gloomers.  I want to say that failure is not an option.  At least, to sow panic and fear when one does not know what they be talking about is irresponsible.  Yes I’m upset.  Because of the loose chatter that passes for commentary.  And furthermore, on the other hand, the guy on TV is going to lose his show if he keeps giggling and wearing a suit.  Because if the Depression hits, it’s going to be like the French Revolution around here – Off with Their Heads.



            Every day they tell us something different.  The mainstream media will tell us how we are doing.  They are saying the establishment has the tools to deal with the problems.  They are trying one thing after another and it hasn’t been enough.  One day soon we may hear everything is OK.  Unless this is a classic battle of good versus evil, and perhaps even still.  

It’s been a real hassle to keep up with the economics of what they say is going on.  I don’t like that it’s complicated and that you have to take peoples word for cause and effect relationships of financial entities.

            In this space I want to relate some problems of the 700 billion dollar bill, even though it’s a done deal and is supposed to be a large part of the solution. 

            Maybe the home mortgages being repaired is a large chunk.  Someone said banks are not going to lend money to mortgage people with no collateral.  (I think they are going to have to.)  I’ve got to say McCain’s recent plan for renegotiating sub prime loans sounds good.  Is it dangerous to say something good about McCain?  More down below.

            This line about injecting capital into the banks keeps coming up.  Likewise so does losses from derivatives and deregulation, including a big legal change in 2004.  Fanny Mae and Freddie Mac are supposed to handle mortgage renegotiation also – they’re authorized for about a trillion dollars, which makes one wonder why the extra 700 billion was necessary.  This bails out the rich and every dollar spent by the government is a reward for improper greedy practices.

            Injecting capital sounds a lot like, give them money.  One person’s view was that we give them the money, then we own some or all of the bank.  This sounds like nationalization.  Now they are saying that an obscure part of the 700 billion bill authorizes the partial nationalization of banks by the govt.  Are we to be thankful for this twisting?

            Also there have been rate cuts and monetary policy expansion like 900 billion by the Federal Reserve.  The monetary expansion works in a similar way to the 700 bill, which is fiscal policy if it ever gets applied.  A good thing is that if it gets applied, a lot of it can be like an investment where the taxpayer gets money back, when purchased assets are resold by the government for example.

            Well here has been a lot of rambling commentary that has been supposed to be more simple explanation of some of the things that are going on.  The fall of the stock market hasn’t been too bad I don’t think, because it can go back up.  In fact, I wonder how much manipulation is being done by bad guys in a struggle of good versus evil.

            On the 700 bill, I learned a lot from  On or around September 30th were posts by Michael Moore, Glenn Greenwald, John Nichols, and Dave Lindorf.  Also Peter Costantini, if only for his title quoting Bush, “This Sucker Could Go Down.”

            There is an October 6th post about Dennis Kucinich, who gets a lot of credit for pointing out that it’s not exactly liquidity problem of the banks, but rather a problem caused by the Accounting Standards Board, The Securities and Exchange Commission, and the Federal Reserve.

            Phone calls were running 200 to one against the Bill.  200 economists signed a letter saying it would worsen the meltdown.  I don’t know that these problems were corrected in the new Bill.  Even oversight, I don’t know that it’s enforceable because it wasn’t in the first bill.  Neither were there penalties for executive theft.  In the bill there was nothing to force banks to rewrite mortgages.  It was only “suggested” that the government be paid back

            The letter from the economists said the bill lacked Fairness because it’s a subsidy to investors at taxpayers’ expense.  It had Ambiguity because the terms, occasions, and methods should be clear and monitored.  Its Long Term Effects were weakening private capital markets.  Perhaps this last meant that these markets incorrectly rewarded too much risk.                                                                    

            So I think that the bill should not have been rammed through.  We should have kept our powder dry without using it.  It’s a bad sign that our politicians ran all over the will of the people.

            This being said, it’s done, and maybe the investment will work out and this fiscal policy will stimulate the economy.

            It’s time to clear up some loose ends.  Yes I think there could be social unrest if the shelves are empty.  No, I don’t think this is going to happen.  Lately they’ve been saying it’s an international situation.  There were a lot of them buzzards standing in line behind George.  What if one of them had to take a piss?  Don’t they drink coffee?

            I digress.  I wish them well.  Regarding McCain, is it dangerous to say something good?  On the Social issues, up and down, I’m liberal.  If I was a one issue voter, it would be for a woman’s right to choose.  But now because of personal problems including scary physical pain, I think of the Demos as mobsters with their unions and big construction projects, and organized crime.  That’s why my politics is taking a hard right.  In fact it’s possible that this financial crisis is engineered with downward pressure by the bad guys who are trying to take over.  If we push up, they will fail and when things stabilize we can do something for the poor people.



            In fact maybe we should do some fiscal policy like another stimulus payment to the poor or even everybody.  You know, trickle up economics.