I had planned to start the Obama version of our projected great crash novel, “Follow the Money” – the tragedy – with a look at the new president’s first moves to correct the problem, but a far better analyst than myself has posted a detailed list of the administration’s initial failures. It can be found on Tom Dispatch at http://www.tomdispatch.com/post/175075/andy_kroll_six_ways_the_financial_bailout_scams_taxpayers and on Salon.com at http://www.salon.com/opinion/feature/2009/05/27/kroll/index.html?source=newsletter.
That leaves me with the option of either repeating what Andy Kroll says or taking a slightly different tack. I’ll choose the latter.
Most media sources recently have become cheering sections for bailout plans and have taken the present upward swings of stock markets (a bear rally, remember) as a sign that the disaster is at an end. For those of us who have noticed that all the millions thrown out of work are still unemployed, that a great many debts in residential and commercial real estate have not yet come up for rate re-setting, that many people are borrowing off their credit cards to pay their rent and buy their groceries, that companies and banks are still declaring bankruptcy, and that many of the most qualified economists are warning that the worst is yet to come, I think it may be in order to look at the administration’s actions in terms of popular but mistaken beliefs.
Firstly, the stock market is not a good indicator of the health of society. It is not filled with the best and brightest of an educated society – these are the idiots that bid up the credit bubble that just crashed and caused the oncoming depression. They also bid up all the bubbles before this – the dot com, the speculative excesses of 1987, and all the rest – and have now piled on the government bail-out bubble of printing trillions of phantom dollars to rescue the so-called investors whose wealth is imperiled by the asset price deflation. The “Wisdom of the Market” is the biggest snake oil pitch since the Devil handed Eve the apple. The market is the abode of the largest collection of fools and swindlers the world has ever known.
President Obama, the bit between his teeth and eager to leap into the role of tragedian has lavished trillions of taxpayer dollars on the bleeding hearts and squeaky wheels on Wall Street. He devotes great attention to the 19 biggest banks that serve the investment community while ignoring the thousands of smaller banks where ordinary Americans keep their savings. He has allowed his administration to underwrite the investments (speculations) of any petty crook who owns a bank, a hedge fund, insurance or financial company – and every sharp eyed market operator out in the bushes – in distressed assets that guarantees them the lion’s share of any profits and uses taxpayer money to backstop any losses. This guy really must have his heart set on the Othello role.
“I pray you, in your letters,
When you shall these unlucky deeds relate,
Speak of me as I am; nothing extenuate,
Nor set down aught in malice: then, must you speak
Of one that lov’d not wisely but too well; …”
It’s quite clear that Americans love free-market capitalism far too well, and blind themselves to the faults and weaknesses that wise oversight and direction could ameliorate. That said, I have to acknowledge the Austrian school and admit that wise oversight and regulation has been conspicuously absent ever since the first cave man took out a loan to buy a flint-knapping site. I state categorically that the greatest problem has been the investment community’s selfish interest in blocking adult supervision until their failures have caused it to land on their necks. The plans for regulating market excesses may work wonderfully well, but the time to institute them and have them operate is before disaster strikes, not afterwards.
I cannot leave this without offering a preview of the next plot element of Obama’s tragedy we must look at next time. The British government has printed so many treasury bonds that no one wants – and bought them itself with phantom pounds – that the UK is expected to lose its triple A credit rating. I have to look at our protagonist’s supervision of the US Treasury bond market, that is actually in no better shape, for the first downward turning point of the novel.