The psycho-babblers are desperately trying to save whatever can be saved of theirs dogmas, now saying that ‘loss of confidence’ is a cause for the economic debacle

Introduction
All the idols of capitalism over the past three decades crashed. The assumptions and presumptions, paradigm and prognosis of indefinite progress under liberal free market capitalism have been tested and have failed. We are living the end of an entire epoch: Experts everywhere witness the collapse of the US and world financial system, the absence of credit for trade and the lack of financing for investment. A world depression, in which upward of a quarter of the world’s labor force will be unemployed, is looming. The biggest decline in trade in recent world history – down 40% year to year – defines the future. The immanent bankruptcies of the biggest manufacturing companies in the capitalist world haunt Western political leaders. The ‘market’ as a mechanism for allocating resources and the government of the US as the ‘leader’ of the global economy have been discredited. (Financial Times, March 9, 2009) All the assumptions about ‘self-stabilizing markets’ are demonstrably false and outmoded. The rejection of public intervention in the market and the advocacy of supply-side economics have been discredited even in the eyes of their practitioners. Even official circles recognize that ‘inequality of income’ contributed to the onset of the economic crash and should be corrected. Planning, public ownership, nationalization are on the agenda while socialist alternatives have become almost respectable.

The financial travesty of democracy

The financial sector has redefined democracy by claiming claims that the Federal Reserve must be “independent” from democratically elected representatives, in order to act as the bank lobbyist in Washington. This makes the financial sector exempt from the democratic political process, despite the fact that today’s economic planning is now centralized in the banking system. The result is a regime of insider dealings and oligarchy – rule by the wealthy few.

The economic fallacy at work is that bank credit is a veritable factor of production, an almost Physiocratic source of fertility without which growth could not occur. The reality is that the monopoly right to create interest-bearing bank credit is a free transfer from society to a privileged elite. The moral is that when we see a “factor of production” that has no actual labor-cost of production, it is simply an institutional privilege.

So this brings us to the most recent debate about “nationalizing” or “socializing” the banks. The Troubled Asset Relief Program (TARP) so far has been used for the following uses that I think can be truly deemed anti-social, not “socialist” in any form.

The Obama as The Inverted Robin Hood: Take From the Poor and Give to the Rich

These past several weeks have witnessed a stunning attack on working people, with the Obama administration leading the charge.

It started with Larry Summers, Obama’s chief economic adviser, responding to the A.I.G. bonuses by pontificating about the sanctity of contracts: “We are a country of law. There are contracts. The government cannot just abrogate contracts.” Like a mad dog pursuing its prey, he pounced on the conclusion that absolutely nothing could be done about the bonuses. Unfortunately, Summers voiced no similar outcry when the Obama administration, only weeks earlier, insisted that the U.A.W. contracts be renegotiated as a condition for the auto industry receiving a bailout, suggesting that a different set of rules applies to the rich than to the rest of us who constitute the majority and work for a living.

However, when a public uproar swept the country in response to these bonuses, many of which were ear-marked for the financial wizards who helped drive the economy over the cliff, the Obama administration executed a hasty about-face. Suddenly, they too were “outraged,” along with everyone in Congress who wanted to keep alive any chance of re-election.

But then, Eliot Spitzer, former New York governor, weighed into the fracas, arguing that the bonuses were only the tip of the iceberg. The real scandal, he claimed, centers on A.I.G.’s decision to redirect billions of its public bailout funds to some of its trading partners, including Goldman Sachs. For weeks, A.I.G. had refused to divulge the names of these recipients and only acquiesced when threatened with legal action. According to Spitzer, the issue is basically this: if taxpayers are being forced to sacrifice by bailing out financial institutions, shouldn’t the financial institutions themselves be compelled to make their own sacrifices rather than being made completely whole by taxpayer money, as is happening when Goldman Sachs receives taxpayer money from A.I.G.? And one could add that, after all, the financial institutions had some responsibility in creating this financial disaster; we working people had nothing to do with it.

But even these setbacks for working people pale in comparison to the latest dog and pony show orchestrated by the Obama administration in response to the toxic assets that are dragging down the financial institutions here in the U.S. and around the world. As Paul Krugman, Princeton economist, observed: “…basically the plan hands out gold-plated toasters to anybody who participates.” Joseph Stiglitz, Nobel Prize-winning economist, described it as “very badly flawed,” offering “perverse incentives,” that amount to “robbery of the American people.”

Basically, the program, which is trumpeted as a public-private partnership, will give billions of dollars of our taxes to subsidize private investors who buy the toxic assets. We will contribute 94 percent of the cost, leaving only 6 percent that the private investors must shoulder. If the toxic assets prove to be worthless, as their name suggests, we taxpayers will suffer heavy losses while the investors can walk away almost painlessly. However, if these assets turn out to be profitable, then the investors and taxpayers share in the proceeds on a 50-50 basis, not on the basis of 94-6, as one would think if fairness marked the bottom line. This kind of partnership resembles the kind that exists between predators and their prey. Or, as Paul Krugman noted, it’s like this: heads the private investors win, tails the public loses. Once again a different set of rules applies to rich as opposed to the rest of us.

All of the above can be summarized in this way: as long as the markets operate to make the rich even richer, we must consider them sacred. However, when they fail to deliver this outcome, the government must step in and, with our tax money, insure that the rich can continue their ascent to ever-greater heights of wealth while the rest of us languish in the dust, struggling to buy a home, keep a job, provide a decent education for our children, secure health coverage for ourselves and our family, and so on.

Tim Geithner´s magical move to restore confidence

US Treasury Secretary Tim Geithner has unveiled his long-awaited plan to put the US banking system back in order. In doing so, he has refused to tell the ‘dirty little secret’ of the present financial crisis. By refusing to do so, he is trying to save de facto bankrupt US banks that threaten to bring the entire global system down in a new more devastating phase of wealth destruction.

The Geithner Plan, his so-called Public-Private Partnership Investment Program or PPPIP, as we have noted previously is designed not to restore a healthy lending system which would funnel credit to business and consumers. Rather it is yet another intricate scheme to pour even more hundreds of billions directly to the leading banks and Wall Street firms responsible for the current mess in world credit markets without demanding they change their business model. Yet, one might say, won’t this eventually help the problem by getting the banks back to health?

Not the way the Obama Administration is proceeding. In defending his plan on US TV recently, Geithner, a protégé of Henry Kissinger who previously was CEO of the New York Federal Reserve Bank, argued that his intent was ‘not to sustain weak banks at the expense of strong.’ Yet this is precisely what the PPPIP does. The weak banks are the five largest banks in the system.

The ‘dirty little secret’ which Geithner is going to great degrees to obscure from the public is very simple. There are only at most perhaps five US banks which are the source of the toxic poison that is causing such dislocation in the world financial system. What Geithner is desperately trying to protect is that reality. The heart of the present problem and the reason ordinary loan losses as in prior bank crises are not the problem, is a variety of exotic financial derivatives, most especially so-called Credit Default Swaps.

World Depression: Regional Wars and the Decline of the US Empire

by Prof. James Petras
Introduction

All the idols of capitalism over the past three decades crashed. The assumptions and presumptions, paradigm and prognosis of indefinite progress under liberal free market capitalism have been tested and have failed. We are living the end of an entire epoch: Experts everywhere witness the collapse of the US and world financial system, the absence of credit for trade and the lack of financing for investment. A world depression, in which upward of a quarter of the world’s labor force will be unemployed, is looming. The biggest decline in trade in recent world history – down 40% year to year – defines the future. The immanent bankruptcies of the biggest manufacturing companies in the capitalist world haunt Western political leaders. The ‘market’ as a mechanism for allocating resources and the government of the US as the ‘leader’ of the global economy have been discredited. (Financial Times, March 9, 2009) All the assumptions about ‘self-stabilizing markets’ are demonstrably false and outmoded. The rejection of public intervention in the market and the advocacy of supply-side economics have been discredited even in the eyes of their practitioners. Even official circles recognize that ‘inequality of income’ contributed to the onset of the economic crash and should be corrected. Planning, public ownership, nationalization are on the agenda while socialist alternatives have become almost respectable.

Weekly Roundup from RGE Monitor

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Open Letter to Dick “Darth Vader” Cheney about the Economic-Financial Crisis and the PPIP (or PPIF), Please stop Johan Norberg right away!

Posted in Blogroll on March 26, 2009 by D-Train

Dear Dick,

I write to you seeking some advice. I explain my problem. As you know we had a great time since the 80´s when Ronny took the White House…maybe do you remember all the fun we had with the guys, especially Milton, when we planned how to get out all those idiots and get theirs money. The plan was terrific: tell them that anyone could be rich if they let us to become even richer! It was a master move! Since tell them that if we got even more money some will “trickle down to them” haha and the “positive growth trend” hihi we created with “our own money creation approach” for 30 years ago or “The cash machine” as Milton used to refer it. Oh, Boy what a time!! Great Fun!! I had to recognise that Milton was a genius, R.I.P old boy! What a story!

Anyway, as you probably had heard some stuff had not been working properly the last year. Some of the guys from “the Street” got high with so much easy money and begun to sell some “insurance” to everyone without a penny in reserve, I think that they called the papers CDS or something like that. They got to idea from some Chinese guy that was working with the probability of a kid get cancer, his parents divorced, his best mate killed and his dog poison in the same time…almost zero. So they used the same arguments to sell a lot of those papers to idiots around the world, now saying that the probability that they papers loose all their value was zero, according to the formula! Great idea!

Well, the problem was, as you know now, that the prices went down…you know I think the guys had a debt mountain of some trillions and had no a single penny… well , no some money they are prepared to take back from the Cayman islands anyway. So we talked with the guys in Washington and told them that they had to pump up some cash or otherwise the whole enchilada would explode in the front of their face! They believe us again the jackasses!! Incredible! I asure you that tall will be fine. The guys from D.C. presented no problem as expected, you know that they are good people, decent people…our people.

No, the problem is that now the idiots from “main street” as we call them now have begun to protest and to ask a lot of questions…Why the government has to support us, where the money is coming from, what about the schools and the pensionfunds and a lot of shit…I’m completely convinced that the idiots that have nothing more to do and are sitting all the day in front of theirs computer surfing and bloging are part of the problem and I think that we have to address this issue rather sooner than later…we can not permit, after lying hundreds of millions in TV stations , newspapers and other stuff, that some frustrated commies take down all this “educational afford”! You know, as a security measure we employed only “people with the right mental disposition” i.e. people that support our way of seeing the world (most of them unfortunately are not “true believers” but only people seeking our gratifications…bonuses they call them now I believe), but the blogers are taking down the charade…We have certainly stop them asap!

Even worst is the fact that some jackass are arguing in public that we had to leave the “free market” works! It is quite worrying that there are some idiots out there that still believe all the crap we talked them. We had successfully pumped up theirs brains with some illusions that those jackasses still defend, but now there are others time my friend! We told the idiots about “free markets” and we talk about something about “democracy” and “liberty”… which of course we mean “liberty of action for us”…as when we talk about “free markets” we mean of course ” free for us” …As you explain for us for long time ago.I don’t remember exactly how we put the whole charade, cause I had at the time a terrible hangover…Well I can tell you that as we own almost all media it was not difficult to pumping out all this bullshit without any problem… But now we are experience some problems with those “hard core” people that still is arguing about “the free market” and other stuff…they are really making a hell for us! They don’t understand that the time for such rubbish is over…We have to stop them before they damage us! This is what happens when you mix idiots with the people that really know what is all about!! I hate those amateurs!

They are talking a lot of crap: That our guys in Washington don’t need to give us some cash, that the “market” is going to solve the whole thing and other bullshit! Ok, we told them to say that the last 30 years and it was working pretty well until it doesn’t… but those idiots don’t understand the point: it was as long as we got the money…and if we don’t get the cash in this way there is not point in continue with the charade! Now, we have to argue that Uncle Sam has to help us for the benefit of everyone and the nation (of course just help us …not take our money and leave us naked) …but those people, the market “liberals”, are really causing us some problems with their rubbish about the “free market”, the “invisible hand” and other stupidity!

I ask you what we can do now. We have certainly shut up those idiots before they damage us seriously and more and more people begin to ask questions!

For instance, lately the mob had begun to ask about the bonuses! That it was too much money and stuff like that…you know…the problem is that before we could tell them that it was necessary to do a “good job”…you know…but now when every idiot knows that we lost control ( and some trillions of dollars) what can we say?

We have to be really creative this time! The piece of art will be to explain to the mob why they have to give us their tax money, without requiring anything from us and respecting the sacred “private property” i.e. our property! Ours banks! and in the same time we get our “well deserved share” of this money!

It will require a lot of inventive talent and audacity. It is because of that I write to you dear Dick.

Sincerely yours

P. Wolfowitz or Wolfi for you…;=)

PS: Say Hello to Donald and “Georgi” when you see them!

PS2: The good news are that last Monday the guys from Washington come with a genial idea how to give us some money without so much questions: they called the giving away for “ Public-private-Investment –Fund” PPIF, I tell you it is a terrific deal. They give us say between 90 and 95 cents for buying something that as most is worth 5-20 cent, but with the face value of 1 dollar. If some idiots pay in the future say 1 dollar and 5 cent, we keep the diff of 10 cent (105-95), this is a 100 % return to our “investment” of 5 cent!! But, here is the magical with the arrangement: if we can not find some jackass that buys the junk paper we have not to pay at all the 95 cent we “borrow” to buy them in the first place!! Genial! All to save the economy (our economy dude) !! Hehe. Ohh these boys in Washington!!

And a shorter version of the same letter

Dear Dick,

I ´m happy but a little bit concern about that there are some idiots out there that still believe all the crap we talked them. We had successfully pumped up theirs brains with some illusions that those jackasses still defend.

We told the idiots about “free Markets” and we talk about something about “democracy” and “Liberty”… which of course we mean “Liberty of action to us”…as when we talk about “Free markets” we mean of course “Free for us” …I don’t remember exactly how we put the whole charade, cause I had at the time a terrible hangover…Well I can tell you that as we own almost all media it was not difficult to pumping out all this bullshit without any problem…
As a security measure we employ only “people with the right mental disposition” i.e. people that support our agenda (most of them unfortunately are not “true believers” but only people seeking our gratifications…bonuses they call them now I believe) …anyway we had success quite well until recently…when we get in, how can I say, in same unexpected troubles…You know…the prices went down more that we expected…and the “positive growth trend” we created with “our own money creation approach” for 30 years ago or “The cash machine” as Milton used to refer it. Oh, Boy what a time!! Great Fun!!

Now we had to find out something and soon…We had convinced some friends in Washington to get us the taxpayers´ money… anyway we talked them that the whole enchilada would explode if they refuse! They believe us again the jackasses!! Incredible!

Well, we had some minor problem with some “hard core” people that still is arguing about “the free market” and other irrelevant stuff…they are really making a hell for us! They don’t understand that the time for such rubbish is over…We have to stop them before they damage us! This is what happens when you mix idiots with people that really know what is all about!!
Well, I have to leave. I have some politicians to convert from “Neoliberal” to “Keynesian”…My bank need a couple more of billions dollar…you know.

Ciao My friends
Wolfowitz or Wolfi for you…;=)

http://www.newsmill.se/artikel/2008/10/02/socialt-ansvarstagande-bakom-krisen

http://www.etc.se/artikel/16801/om-problemet-med-en-johan-norberg

http://www.bloggportalen.se/BlogPortal/view/BlogDetails?id=1565

http://www.expressen.se/1.1232252

http://www.torefriskopp.se/tips/johan-norberg-forelaser-i-linkoping

http://enlitenrost.se/2009/03/24/charlatanen-johan-norberg-pratar-strunt

http://www.zaramis.nu/blog/2008/10/03/radda-inte-bankerna-vanstern-som-johan-norberg

http://www.dn.se/opinion/huvudledare/allt-kan-inte-regleras-1.833111

A Real Stimulus Package

For the great majority of Americans, their homes represent the largest portion of their assets. This is particularly true of Americans of more modest means, who have been hit the hardest. Watching their single biggest assert drop another 20% will be devastating and for many will mean they will not be able to retire as they had planned. More Americans own homes (68%) than own stocks (50%). This helps explain a recent poll which shows more Americans are worried about house prices than about the decline in stock prices.
Falling home prices means that consumers have to save more for retirement, which results in lower consumer spending, which translates into lost jobs and more homeowners coming under stress — a vicious spiral that is increasing unemployment. Realistic estimates of unemployment rising to over 10% within the year abound.

Escalator of Life or the Debt Binge

Americans have been on the escalator of life for the last 30 years. The escalator has been going up for the vast majority of that time. Since Ronald Reagan was President, the escalator has been moving upwards with only a few momentary breakdowns. We wanted it all. We believed it was our right to have it all. Americans did whatever it took to have it all. That meant an explosion of household debt promoted by bankers, the Federal Reserve, politicians, the media, and Presidents. We were dancing on the escalator of life for decades but our shoelace got caught in the escalator last year and severed our foot. We are bleeding to death as the escalator heads relentlessly downward. There are millions of Americans who have a guilty feeling about how they have lived their lives. They had their cake and tried to eat it too. Americans are now repenting by dramatically reducing their spending. The U.S, government is desperately attempting to convince Americans to get back on the escalator. The ridiculousness of these efforts brings to mind a comedy sitcom.

Assessment of The Geithner’s plan (PPIP)

The main sticking points in previous market-based approaches to clear toxic assets from banks’ books were threefold:
a) How to value illiquid assets?
b) Once a transaction price is established, will banks be willing to sell and take a hair cut?
c) How to induce private investors to purchase legacy assets without unduly wasting taxpayer money?
a) Valuation of Illiquid Assets
The theoretical foundations of Geithner’s plan are provided by Lucian Bebchuk from Harvard University among others. He explains that “if the underlying market failure is at least partly one of liquidity, an effective plan for a public-private partnership in buying troubled assets can be designed. The key is to have competition at two levels.First, at the level of buying troubled assets, the government’s program should focus on establishing many competing funds that are privately managed and partly funded with private capital–and not creating one, large “aggregator bank”– funded with public and private capital and engaging in purchasing troubled assets. Second, several potential fund managers should compete for government capital under a market mechanism resulting in maximum participation of private capital and minimum costs to taxpayers.”