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U.S. | Global Justice and Anti-CapitalismRescue for the Few, Debt Slavery for the Many
We are now entering the financial End Time. Bailout “Plan A” (buy the junk mortgages) has failed, “Plan B” (buy ersatz stocks in the banks to recapitalize them without wiping out current mismanagers) is fizzling, and the debts still can’t be paid. That is the reality Wall Street avoids confronting. “First they ignore you, then they denounce you, and then they say that they knew what you were saying all the time,” said Gandhi. The same might be said of today’s overhang of debts in excess of the economy’s ability to pay. First the policy makers pretend that they can be paid, then they denounce the pessimists as spreading panic, and then they say that of course students have been taught for four thousand years now how the “magic of compound interest” keeps on doubling and redoubling debts faster than the economy can squeeze out an economic surplus to pay. What has ended is the idea that “the magic of compound interest” can make economies rich without having to work and without industry. I hope we have seen the end of derivatives formulae seeking to make money by playing in a zero-sum game. A debt overhang always ends either in foreclosure of the debtor’s property, or in a debt annulment to preserve the economy’s overall freedom and equity.
This means that the postmodern economy as we know it must end – either in financial polarization and debt peonage to a new oligarchic elite, or in a debt cancellation, a Jubilee Year to rescue society. But when the government says that it is reviewing “all” the options, this reality is not one of them. Treasury Secretary Henry Paulson’s first option was to buy packages of junk mortgages (collateralized debt obligations, CDOs) to save the wealthiest institutional investors from having to take a loss on their bad bets. When this was not enough, he came up with “Plan B,” to give money to banks. But whereas Britain and European countries talked of nationalizing banks or at least taking a controlling interest, Mr. Paulson gave in to his Wall Street cronies and promised that the government’s stock purchases would not be real. There would be no dilution of existing shareholders, and the government’s investment would be non-voting. To cap the giveaway to his cronies, Mr. Paulson even agreed not to ask executives to give up their golden parachutes, exorbitant annual bonuses or salaries. More http://counterpunch.org/hudson10132008.html
Requiem for the Bailout
By NORMAN SOLOMON
It’s mid-October, and the Wall Street bailout that was supposed to save the economy from collapse is a flop. Only two weeks ago, the media hype behind the $700 billion bailout was so intense that it sometimes verged on hysteria. More recent events should not be allowed to obscure the reality that the news media played a pivotal role in stampeding the country into a bailout that was unwise and unjust. Exceptions in the news coverage underscore the fact that other perspectives were readily available when the Bush administration began pushing its bailout proposal in late September. “Many of the nation's brightest economic minds are warning that if the Wall Street bailout passes, it would be a dangerous rush job,” McClatchy Newspapers reported on Sept. 26. For instance, economist James K. Galbraith called the warnings of economic disaster in the absence of a swift bailout “more hype than real risk.” He added: “A nasty recession is possible, but the bailout will not cure that.” When the House of Representatives rejected the bailout on Sept. 29, all media hell broke loose. During the next few days, journalists and selected sources took turns decrying the failure of House naysayers to recognize the urgency of the moment. The nation’s economy was at stake, and craven ideologues on Capitol Hill were dithering around! Countless editorials and pundits castigated the House members who had voted no. The condemners spanned the mainline media spectrum; liberals, moderates and conservatives excoriated the House and called for a swift reversal. More http://counterpunch.org/solomon10132008.html |