New York - The Hank and Ben Show was doing so well in the ratings. They crafted a plan -- ok, only 3 pages but still a prodigious effort in an era when so few can agree on the need for heat on a freezing day. But now the great unraveling has begun. Remember Karl Marx's lesson on the dialectic: thesis leads to anithesis resulting in synthesis. Maybe.
They sold the Democrats on the need for a bailout. They made it big so the rest of the world would notice and be impressed. They started out unreasonably demanding total power knowing they would have to compromise and so allow all sides to win something and hence come aboard.
Paulson knew he had to act fast, to make it happen in the same time period in which God was said to created the world. The 7 Day clock was ticking and they seemed headed for the endzone. A former football player, he avoided blocks by Nancy and tackles by Barney and was ready to throw a Hail Mary Pass if all else failed. President Bush was awakened from his slumber, given a script and a role to play in his White House pulpit. When his own party balked, he summarized the problem this way:
"This sucker could go down."
It wasn't clear who was the sucker; the system, the taxpayers or both. But it didn't matter. The credit markets were seizing up. Washington Mutual imploded and the hard rain that Dylan warned us about was falling ominously on Washington and Wall Street at the same time.
Was this the deluge Jackson Browne warned about?
"By the magnitude of her fury in the final hour
And when the sand was gone and the time arrived
In the naked dawn only a few survived
And in attempts to understand a thing so simple and so huge
Believed that they were meant to live after the deluge"
There certainly was a deluge of conflicting opinions, posturing and polemicizing. There was hysteria on the right about the coming of communism which must have amused the Chinese, and anger on the left which expressed itself in protests that the Big Chief Democrats ignored as they compromised (or caved) their way to the table.
Missing in most of our media coverage which reported the drama as a sit-com while focusing on the political debate to be or not to be, was any sense of whats really behind this -- a debt we cannot manage or wish away.
We are bankrupt and this may be a going out of business sale, as foretold by the Iranian President who said the US Empire is spent. Noted the Journal Inquirer.com:
... 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?
Lordy, Ms. Claudy!
Across the pond where the Bank of England was joining other central bankers including the Fed in pumping additional billions into money markets, the right wing magazine of Tory leanings, The Spectator ran a piece that said; "FACE IT, MARX IS HALF RIGHT ABOUT CAPITALISM." Oh the pain in that admission. The article focused on DEBT, the 'd'-word that is so often conspicuous by its absence:
Trading the debts of others without accountability has been the motor of astronomical financial gain for many in recent years.
....This crisis exposes the element of basic unreality in the situation - the truth that almost unimaginable wealth has been generated by equally unimaginable levels of fiction, paper transactions with no concrete outcome beyond profit for traders. But while we are getting used to this sudden vision of the Emperor's New Clothes, there are one or two questions that, in government as in society at large, we at last have a chance to ask. Some of these are elementary and practical. Given that the risk to social stability overall in these processes has been shown to be so enormous, it is no use pretending that the financial world can maintain indefinitely the degree of exemption from scrutiny and regulation that it has got used to. To grant that without a basis of some common prosperity and stability, no speculative market can long survive is not to argue for rigid Soviet-style centralised direction. Insecure or failed states may provide a brief and golden opportunity for profiteering, but cannot sustain reliable institutions.
And so they too call for more regulation to save capitalism from itself.
Perhaps that's why usually conservative money managers are backing the bailout as James Quinn explains in an article that calls the US the Titantic.
As I've watched the various business networks over the last few weeks, I sense desperation and fear among the commentators, pundits, and "experts". It is a fear based upon self interest. Their lives depend upon the masses keeping their money invested in the market. They have overwhelmingly been in favor of the bailout bill. I wonder why. Jim "Mad Money" Cramer, who has a net worth of $100 million, is in favor of the bill. Larry "Free market capitalism is the best path to prosperity" Kudlow, a multi-millionaire, is 100% in favor of a socialist bailout of the criminal investment banks. They support this "blank check" to a government that is already $9.65 trillion in debt, because they want to maintain their lavish lifestyle, multiple estates, and prominent positions in society.
So as the contradictions mount, the real audience that Hank and Ben are playing to are the investors and banks in Asia who have kept our economy afloat. It is they who are losing confidence. China is warning its banks not to pump more money into the USA. We are dependent on their largess, on OCM (Other country's money) and as they go, we go. This reality is not being made clear as the Republicans and Democrats trade accusations or just stop talking to each other.
I fear President Bush may finally be right: "This sucker could go down." Part of me thinks that may not be a bad thing--but, alas, I know better. What we really need is debt relief but that's the stuff of another column.