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We already practice socialism

1928-great-depressionthumbnail.jpgScarecrow at FireDogLake has a sobering post this morning. The Republicans are well on their way to making over the US economy in the Iraq model. We are headed into a recession, boys and girls, and it will be a hard landing, complete with rampant inflation, tight credit and a falling dollar. Congratulations, George! You have managed to compare favorably to Hoover. Nice!

Both NPR and Marketplace: Morning Report had extensive coverage of the takeover of Bear Stears by J.P. Morgan this morning. Over the past week, Bears Stearns, “not the nicest bank in town”, went from trading at $30/share to $2/share. And the scary thing is that Bear Stearns investors might have gotten more than the bank is worth at $2. Now, Morgan turns around and borrows the money from *us*, the taxpayers, to buy Bear Stearns. So, essentially, we now own a worthless company, but the people who drove Bear Stearns into the ground are not going to go bankrupt. Hallelujah for them! Not so much for the poor home owners who were suckered into paying extravagant prices for modest housing by getting an adjustable rate mortgage with a teaser rate. Their investments are worth less than the mortgage and they can’t unload it on the government like J.P. Morgan can. So, what we have here is socialism for the rich where we redistribute tax payer wealth from the people who work to the people who invest. What a sweet deal for the well-heeled.

At least one of the interviewees this morning makes this point and goes one further. He says we ought to let the market take care of itself. The impact will be deep if the investment community starts to go bankrupt but it will be soooo much worse if we keep bailing them out. When will they ever learn? What’s the worst that can happen other than some very rich people become suddenly not so rich? If we keep them above water, we just cover up the rot at the hollow core of the finance industry. Cut them loose, let us take the hit and get on with rebuilding.

And it goes without saying that when the $#@% hits the fan, you aren’t going to want a neophyte or a economic lunkhead (by his own admission) be in charge of the fallout. I suspect you want someone who’s actually seen a crisis up close and personal to be in charge.

8 Responses

  1. From the NYT website:

    But the jittery mood means even well positioned banks may be reluctant to take advantage of acquisition opportunities, bankers and analysts said.

    “I think M&A is too difficult now,” a London banker said. “This is about catching a falling chainsaw. It’s not just about cutting yourself if you get it wrong, it’s about losing a limb.”

    When the M&A markets go quiet, it is not a good thing.

  2. The story about Bear Sterns just infuriates me.

    Why not let Bear Sterns go bankrupt? I can’t believe the Feds will just go ahead and take $200 B of our money to bail out a company that is drowning because of its own flawed business practices.

    I remember when HRC came out with a plan to bail out people who were being crushed by their (crooked) mortgages. All those numbskulls were whining about “personal responsibilities”. Where are all those people now.

    Pssst, listen here Ben: It’s the law of the free market. Companies go bankrupt at some point and life continues. In fact entire economies have gone bankrupt and have come back (US, Japan, Germany to name a few).

    One more thing Ben: You are just shredding the Dollar. If that was your intention, mission accomplished.

  3. This economy is in the tank in a way I didn’t think I’d witness during my lifetime, and I’m so afraid for what is still to come. I’m feverishly saving money, although the return isn’t nearly as great anymore as the Fed tries to help things by cutting interest rates. I’m close to putting my money in a shoebox!!!

  4. Clinton on Economy: ‘We Are In The Soup’

    snip
    “I would call the leadership of Congress and say you may be on a two week vacation –- I want everybody here we are going to sit here and figure out what we are going to get out of this congress ready to be passed as soon as you come back –- this cannot wait,” Clinton said. “So I feel so strongly as you might guess this is a perfect opportunity for the kind of presidential leadership that we desperately need that we are not getting.”

    http://blogs.abcnews.com/politicalradar/2008/03/clinton-on-econ.html

  5. Bear, Stearns — Larry Kudlow’s old den of rightwing cranks.

    Sadly, this is too serous for schadenfreude. When the big boys fall out of bed, the little people get smashed.

    Not that is isn’t the perfect date for the Little People to get smashed, but …

    Those who adhere to reality-based finance and economics have been worried a long, long time as make-believe displaced value. Enron wasn’t a big enough wake-up call.

  6. Just dropping in to say Happy St. Patrick’s Day–it’s a grand day for a parade here in the NYC metro area. Clear blue skies, crisp cool temps, and no wind.

    And it’s a grand day for a swearing in of the new NY governor, David Paterson. What a marvelously, completely, wonderfully liberal politician! Good speaker (gives speeches from memory and seat of the pants), great teller of jokes and stories–and unabashedly liberal Said caring for the people is what all politicians should have as their first priority..

    The local CBS reporter said the crowd was “exuberating,” the atmosphere was more like a pep rally than an inauguration or swearing in–and it was! Everyone introduced was cheered, but Hillary got a huge cheer. The religous people who gave the invocations were just as beautifully liberal as the new governor. The good will was just swirling around, pulsing out to the entire region.

    Whoohoooo!

    I exuberating!

    It feels so good to feel so good about one of our pols–especially after the angst and tension of the Dem presidential primary.

    Gotta run–have a great day.

  7. Sugar, I know how you feel, er, make that I feel your pain. Hubby and I are just a couple of old folks limping toward retirement. We’ve tried to do all the appropriate things to prepare, and things were looking pretty good. I’m not just being partisan when I say I truly believe Hillary is the only one of the three candidates left who might be able to save us from the mess that Bush is leaving.

    Jawbone, your post is a ray of sunshine. Thank you.

  8. Not that is isn’t the perfect date for the Little People to get smashed, but …

    Hah! Now, where’s that bottle …

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