kirktastic

I can’t help but be a little nervous about the Bush Plan For Saving the Economy. If this is anything like the War on Terror or response to Katrina, we are all fucked. We (as a country, as taxpayers) are going to take our $700 billion in new debt. To buy up bad debt from Wall Street. The “losses” are not really lost. Many people got billions of dollars making these bad loans and setting up financing schemes that they themselves did not understand. The premise all along was that housing prices would always go up. It cannot go down. Then when housing prices did go down (fortunately, I live in an area where prices are still going up, like my friends in the PNW) the cards came falling down.

The fact our economy is based on mortgages on people’s homes and to a lesser extent on stuff we manufacture should give people pause. We’ve mortgaged our economy and as long as times are good, no problem we can just borrow more because our collateral is worth more! This isn’t a way to run your household budget and it isn’t a way to run the largest economy in the world.

The fact this deal is being rushed through in a matter of days and there’s no deliberate thought put into this scares me. Naomi Klein’s incredibly awesome The Shock Doctrine. Here thesis is: You need a disaster to push through unpopular policies. She gives several examples in the book and she thinks one is playing out right now in front of our eyes. If you haven’t read her book, you need to read it right now.

The government is throwing good money after bad to bail out an industry that abhors regulation because it stifles free market capitalism. What a load of bullshit. In a truly free market there would be no bail outs. If a business fucked up it would fail. Because there is the Fed and there is the promise of bailouts, these douchebags can continue to make money without risk. The government will bail them out. If you don’t pay your mortgage the bank will take your house away. But if you have billions in mortgages don’t worry, Uncle Sam will take it off your hands. Eventually you and I will be paying for it in the form of taxes and a weaker dollar.

Just as when a consumer takes on more debt, they run the risk of having their credit rating fall as their debt to income ratio gets out of whack, the United States runs the same risk. This $700B plan dilutes the dollar. If the people on the planet that have the money and buy US treasuries stop, then we’ll have to pay higher interest in them. If the value of the dollar falls, other countries may tend not to base their multinational deals on the US Dollar. If OPEC did that with oil we are fucked. If other countries decide to keep more of their reserves in euro rather than USD, we’re fucked.

I had an economics professor on the first day of class tell everyone to take out a dollar bill. It didn’t matter the denomination. It says “In God We Trust” which is odd for a supposedly secular country. At one time, the US Dollar was actually tied to gold and silver. The dollar used to say that you could get a dollar’s worth of silver or gold upon demand. Well, now the dollar is based on trust from God. Or for the secularists and heathens, the idea that the dollar is worth something. As long as everyone believes the dollar is valuable, it is valuable. When people stop believing the dollar is worth something, it will be worthless. Can’t happen? Right, go back to that show about the people trying to fit through giant styrofoam blocks.