Killing the wounded
How do the Republicans promise to fix the situation? They want to streamline the financial system (i.e. more deregulation), lower corporate tax rates (2/3rds of the corporations don’t pay any taxes now, no matter what the rate is.) and take the bad debt off the books of the criminal companies and give them to the taxpayer. In other words nationalizing the debt, who thought the Republicans, would lead the charge in a socialist revolution? Of course the relief is only for members of the state capitalist party (Corporate Democrats & Republicans).
While they compare it to the Resolution Trust Corporation that dealt with the Savings & Loan Crises (you might want to look up John McCain and the Keating five) it is not comparable. First the amount of debt is staggering (at least TWO TRILLION DOLLARS) when compared to the S&L crises.
Second, instead of taking over the institutions and selling off their assets to pay the debt, this time we are going to take just the debt. Every man, woman and child in the country will shoulder a minimum of an extra $2,000 of national debt. Like the old centralized government of the Soviet Union, the party members keep the assets and tell the working class you will now have to work harder for the good of the state, the corporate state that is.
If workers lose enough to take to the street against this unprecedented theft by the privileged class they will use the fear of “chaos and anarchy” in the streets to justify authoritarian repression to control those rebellious ones who object to being robbed with a pen.
Meanwhile the economic pundits are telling average Americans to have faith, buy while stocks are low and that the government will make a big profit of their purchase of the bad debt. If that’s true why aren’t private investors buying it up like ice after a hurricane?
Killing the Messengers
While Paulson and the other corporate hacks talk about the problem being based in the mortgage market, other experts who predicted right caution that is just the tip of the iceberg. In addition to the mortgage based securities, the junk bonds issued by the leveraged buyout specialists, credit derivatives (like those issued by AIG) and inflated values of commodities will undermine the whole American economic system.
As the true costs of the bail out rises for the unknown government commitment to take on the debt of those “to big to fail”, federal debt will skyrocket over the $9 trillion Bush has already stacked up. The increased debt will be paid by printing more dollars which allows repayment with dollars worth less than borrowed but creating inflation because of its lost value to purchase goods and services. Decreasing production, falling wages and inflation equals stagflation.
To hide the fact that they couldn’t even see the bottom of the abyss Paulson and the wizards of Wall Street came up with a plan to rescue themselves, hide how worthless these stocks, derivatives and junk bonds really are. You prohibit short selling. Telling the public those who bet on stocks falling were the cause of the problem, they were blamed the short sellers for “crashing companies”.
The truth is short sellers provide an indicator of a products real worth, which they bet is much lower then advertised. Borrowing the stock they actually buy it when it drops to the price they predicted, pocketing the difference. The positive side of short selling is they must purchase the product at that lower price they predicted. The forced buying of the product many times prevents the value from going even lower, putting the brakes on a sell off.
Many traders are now saying there is nothing to indicate what the market will do; trading is purely a speculation on what the government does next not the market value of any product. Those complex financial products now being akin to the old fake missiles the Soviet Union used to put around to convince the Americans they were really powerful, Paulson and friends hide the true amount they’ve dumped on the American public.
The best part of being rich and powerful is you don’t have to pay for your mistake. The government plan gives them the incentive of continuing their bad behavior, much like bailing the alcoholic out of jail and dropping him off at the nearest bar. Meanwhile millions of working taxpayers will lose their homes, jobs, healthcare, businesses, retirement funds and any chance for higher education. The simple fact is that corporatists in both parties took a federal surplus and turned it into the greatest public debt in history and took a vibrant national economy and bankrupted it. John McCain promises more of the same.
How bad could it get? We could end up a third world country where a very few control most of the wealth while the rest are pitted against each other for survival. Stephen Mihm of the New York Times quoted economist Roubini referring only to the bad mortgage debt when it was estimated to be $600 billion, as saying, “Even if it’s closer to a trillion, we’re not even a third of the way there. We have a subprime financial system, not a subprime mortgage market."