So much of our way of life is unsustainable, but it seems like our politicians are trying to preserve all of it. As if they think a lifestyle based on importing chinese crap, exporting weapons, moving our manufacturing to Mexico, building McMansions on farmland, running our lives on credit, saving zero dollars as a nation, shrinking the middle class, letting our cities rot, and leaving our healthcare up to insurance companies instead of doctors, is something we should be fighting for.
I thought we had finally hit bottom, but now I'm not so sure. Corruption runs deep. There are a lot of people making money off of our misery. I was hopeful that we'd finally see some progress now that the people on top are hurting too, because of the Stock Market. But these bailout proposals look like free cash for Wall Street.
And why the hell does big business think they're entitled to free cash and aid from the government without penalty? Oh, right, cause there's no such thing as a free market, we always bail out the fat cats, that's the way it's always been.
two big issues are bugging the shit out of me. Healthcare and the Economy. I've decided to start with the Economy.
2 Opinions about the economic problem
There seems to be two general opinions on what the problem is in the Stock Market.
1) the first opinion is the Tim Geitner, Paulson, Wall Street perspective
2) the second opinion is the Krugman, Stiglitz, Robert Shapiro, Richard Freeman, and dcoffee perspective. Along with all the others who support wasting as little money as possible, protecting the public, and letting the lying gamblers on Wall Street who got us into this mess go broke.
1) the first opinion;
The main problem is that investors are scared. There is too much instability in the market, and nobody has confidence that they can make money. But things are fundamentally sound, the assets and most of the companies are OK, they're just undervalued because nobody is buying right now. But eventually things will go back to normal.
2) the second opinion;
Some of the money that people had on paper never existed, or it was grossly inflated because of the crazy housing bubble and other bundled debt that was sold. So actually there are 2-3 trillion dollars missing from the stock market, and it's not coming back.
these two ideas are not really compatible. Sure there is a crisis of confidence, that is obvious, but the money either exists or it doesn't. And if it doesn't exist, we'll have to find out what's worthless sooner or later. Or we can let the government buy the trash and save Wall Street's ass.
1) the first opinion supports the idea of giving 'aid' and 'relief' to financial institutions to help them get through this troubled period. Everything will go back to normal eventually, but right now the usual investors are just acting irrational. Maybe the government could buy the worst assets that nobody really understands, and nobody wants. Then it's our problem, instead of Wall Street's, and wall street can at least go back to normal.
2) the second opinion says that, there was a lot of gambling going on in the market, there was a lot of deception, and everybody lost money in the end. Now the public as a whole is in danger because our money was in that corrupt system. The government is the only one who can stabilize the market for the sake of protecting us all. This involves firing the people who got us into this mess, taking control of all the assets from that institution, not just the 'toxic assets'. The government reestablishes confidence by figuring out what all that stuff is really worth, and sells it back once we've made sense of it. We've done this in the past, in the 80's during the savings and loan crisis, maybe you forgot about that crisis, cause the nationalization plan worked damn well.
1) you might call the first option, cash for trash. Or a Bailout.
2) you might call the second option, detox. Or Nationalization.
The fundamental disagreement is weather the money exists or not. Call me crazy, but I don't think people on Wall Street can't accept that the money is gone. If you're on Wall Street you cannot be objective, because you want that money, you expected it, and the fact that it's gone is just impossible, no matter how much research you see to the contrary.
What happened to the money? A lot of it was based on mortgages and other debt. Everyone assumed that housing prices could only go up. So you got a big mortgage, and bought an amazing house. Your house was like a huge credit card that not only had a big credit limit, but its value went up, and eventually you could sell it and make a profit, or at least pay off a chunk out of the debt you owed on it. You wanted an expensive house, so even lame houses became expensive, and you didn't care, cause the value could only go up. At least, that's what everyone said.
The money was based on all of our debt, and we had a shitload, we still do. But we're not so sure we can pay it back, and neither are the banks, cause unemployment is rising. When you take out a 20-30 year mortgage at 4% - 5% you end up paying double, that's right, double, go ahead do the math. So that means the banks, as soon as they gave you that mortgage, they acted like they had cash in their hand. They figured about a quarter of the overall money they were owed wouldn't be paid back. So you get a $200,000 loan, they double it to $400,000, and subtract a quarter, and they guess they're going to make $100,000 from the interest over time. so they took that money, and used it on the stock market.
Add our consumer debt to that pile. And you realize this money is not coming back.
There's a hole in the market, that money is gone. The part that bugs me is that this problem was created on Wall Street, and they expect the taxpayer to bail them out. We should bail ourselves out, and put the greedy crooks who crashed the system in jail.
This is going to sound crazy but I think a lot of this is caused by people moving out to the Suburbs also known as sprawl. Yes there are towns and cities and Villages but that not what I mean, well maybe a little bit. When everyone lived in the city everyone was close. Now as people move out they depend on cars and gas. But what happens is you lose community. When you live and work in the same area you care about the people where you live. I think that lost sense of community makes it easy to ship jobs of china or some other country. You don't see the guy who loses his Job because he works at a place that made that part. Even if you don't see that guy you don't care about him either way since the sense of community and what is important for the whole instead of you. That is one thing that I do like about China (yes it can be bad to) That the good of the whole is more important then the one. I think we could use some more of that in our country, but no so much so that we take rights away. I also think that moving out to the burbs destroyed housing markets. What do you do with houses that you have no one to buy because more houses where made but now you don't have enough people to live in these nice city houses. Even if they could then what would you do with the poor homes. Well what you do is you find renters and try to get them to buy a house. But see they don't have the money so you give them a loan anyways. Again I think that if a Banker really knew someone or knew that person knew someone else they knew they wouldn't lend them money, again the community thing. I think one other factor is that it used to be Banks could only be open in one State. Yes all banks could only be state banks and some where that changed. Again with the community. Yes there are some banks that are only in one state (M&T still might be one). I'm not saying people still wouldn't be greedy. But I think it makes making a bad choice tougher to make if the it costs the guy on your softball team or in your bowling league is job.
More reading. I'm a little crazy this morning, I think it's going to be a two computer day, one for work, one for news.
Here are some articles arguing for nationalization.
Stiglitz :::link:::
Krugman :::link:::
Obama could lose his credibility if he doesn't handle this right :::link:::