PLUTOCRACY SAYS: THE POOR SHOULD DO WHATEVER IT TAKES TO INSURE ONGOING SPLURGING BY THE RICH. And do it NOW, otherwise the Rich WILL DESTROY YOUR COUNTRY! The Rich shall not suffer further the destruction of their derivatives and their hedge funds!
WHAT “WE THE PEOPLE” SHOULD REQUEST INSTEAD: NATIONALIZE, ACCORDING TO THE PEOPLE’S NEEDS, not according to the needs of the Plutocracy. House prices will still fall, as needed, but nationalizations will preserve the core of the economy.
Abstract: Comrade Lenin wanted a dictatorship of the Proletariat, comrade Bush wants a dictatorship of the Plutocracy. Same idea. In both cases, a dictatorship of them and their friends (see Art. 8 below). Bush sent his underlings, Paulson and Bernanke, the Treasury and Federal Reserve chiefs, to make the case for their comrades’ power grab to the Senate (September 23 2008). They have owned America, the world, for so long, it’s hard to let go.
The plutocratic scheme consists in giving 700 billion dollars to some of the richest financial institutions, owned by the richest individuals of the USA, the very authors and beneficiaries of the present crisis. (315 billion dollars was already distributed; the 85 billion dollars AIG deal was fairer to the People, because it was a bit of a nationalization, very differently from the 700 billion proposal.)
The basic logical flaw of the plan is that it assumes, to sell itself, that mortgage back securities will recover, but that assumes in turn that the still unsustainable values of the housing markets will themselves climb back to their old peak. And that will not happen, because it would prevent an economic recovery.
The intrinsic injustice of the plan is astounding: if there was a need for a blatant proof that some believe they have made the USA into a plutocracy, here it is! The effrontery of it all is astounding. The arsonists come to ask those they have burned the houses of, for another cool trillion dollars, to buy more gasoline.
The People of the USA should instead insist to nationalize all and any financial institutions that need help and are of public interest (like AIG). Others should be left to fail (like Lehman). Drop back down the abyss mysterious financial devices that should never have existed to start with, and were made to obscure democracy. Derivatives should be heavily regulated.
(By contrast, the Treasury plan only send money to those who caused the problem, without buttressing the core.) ***
To solve the financial crisis of the USA, it’s crucial to remember first the correct hierarchy of all basic values. The financial problem cannot be established before one resets one’s mind with fundamental philosophy.
The founding document of the USA starts with: “We The People”. It does not start with “We The Paulson”. It does start with “We The Plutocracy”. Still, making the rich richer is the spirit on which the Treasury plan to “bail out” some of the richest elements in the U.S. financial system rests. It is as if the Bush administration decided to taunt the American people with a final constitutional outrage. All what’s missing is to put Halliburton in charge of rescuing the USA, like it rescued Iraq before. In any case, that latest Bush offensive, that “Paulson” plan, violates at least two fundamental aspects of the U.S. Constitution (the principle of equality and the General welfare Clause).
The Paulson “plan” consists into using the U.S. government to buy at “close to maturity prices” (Bernanke admitted), “assets” that have, everything indicates, no value whatsoever: That sublime idea is supported by the U.S. Federal Bank! It’s an old boys network! Paulson’s plan is for the poor to rescue the rich. The former head of Goldman Sachs wants to save his kind, or more exactly the ongoing profits of his kind, by having the People pay his friends so high a price for useless garbage that it will make them rich enough again to insure their ongoing domination. It all bathes in that same mood that brought us the victorious destruction of Iraq: boundless impudence, all glued up together by the Big Lie technique. (See more on Paulson using the Big Lie technique in the P/S, black on white, and in front of Congress, of all places!)
It is claimed that the 700 billion number would have been obtained by considering that 5% of the mortgages would be total losses (“foreclosures”). But there are reasons to believe that this is just a tall tale for children. (A much more sinister explanation is suggested in the P/S.)
Instead we humbly suggest that The People should rescue The People first. Shocking, but the fundamental beneficiary of the republic is “We The People”, remember? And the fundamental value of all animals is … their own survival.
What does “We The People” need to survive? The People needs a functioning financial system, and first of all, a roof.
Contrarily to what Paulson, Bernanke and the New York Times (!) assert, “the foreclosures and house price declines” are NOT “at the root of the crisis”. No, no, no! It only looks so. In truth, foreclosures and declines are more a consequence of a much greater crisis. If someone comes and steal your home, you do not say that the decline in your home value is at the root of the crisis. What is at the root of the crisis is that you were stolen, and there is a thief out there. The American People was stolen, that is why home values are going down so dramatically.
The root of the crisis is manipulations by financial operators (those friends and esteemed colleagues of Paulson), who, in turn, acted on their underlings to create, among other things, housing and credit bubbles. (One example; by encouraging some salaried appraisers to overvalue houses, and others to underestimate credit risk.) Those bubbles, arguably the greatest of all times, anywhere, made housing unaffordable to The People. Lowering of the housing prices is the one and only solution, until they meet average salaries somewhere down there. So prices should be encouraged to go where society can afford them. That does not mean people in distress, especially working families, should not receive direct, personalized financial and legal help from the government, on a case by case basis, so they can have a roof. Out of the mansions, into the rentals.
To rebuild a functioning financial system, there is no choice but to nationalize AS NEEDED. Paulson’s plan to buy the garbage of failed institutions at astronomical prices, so that said institutions can be saved, and especially his friends and esteemed colleagues and hyper rich owners of the USA remade whole, and some, should be unacceptable under the capitalist and the socialist philosophies, and for the same basic reason, namely that it would be totally unjust to rescue those who have gravely faulted.
Now, of course, one could reestablish a fully feudal system where, the tougher it gets, the more the serfs serve their Lords. The Paulson plan in a nutshell.
A fairer solution to the whole mess is what the French would do: nationalize, arrest the crooks, seize the assets, and legislate. But even the supine U.S. population may have to come to that: use triage, and nationalize to save The People. With several trillions of losses probable among financial institutions, the solution we propose below is the only one (because of a mix of several trillions of real estate losses, plus leverage, it is impossible that the losses be less than that).
TRIAGE: The People needs some services, such as banking and insurance. So if an institution necessary to the People is failing, give it whatever money it needs to fulfill its business obligations, the ones that have a meaning for the People. If the institution (like Lehman Brothers) has no meaning to the People, let it fail.
NATIONALIZATION: any company requiring People’s money for its ongoing operations should become property of the People of the United States of America. Shareholders would get an IOU for future reimbursement only to the lesser of the amount that their shares were worth at the time of the nationalization (averaged over a few days) or book value. This is fair, because the value of these shares would have gone to ZERO without government intervention. So it’s a gift. The shareholders have a responsibility in the mess, they deserve some punishment.
Since only institutions with legitimate business would be saved, in the fullness of time, the nationalized entities would turn a considerable profit for The People. That would pay for the whole rescue operation. Another source of income would be seizing the 100 billions of personal profits just made by the “banksters” that led the crooked system. (FDR used the word “bankster” during the Great Depression.)
P/S 1: The concept of “illegitimate business” implicit above may sound strange. But it is not as strange as the mysterious mathematical higher derivatives expectations values of credit swaps that were traded without being “capitalized”, with wild abandon, without any supervision or understanding from anyone. That created a whole field of pseudo “economic” activity that should not have existed, because it was no good for anyone except those who precisely want now to be paid off for having created it!
One should LEGISLATE financial transparency. What best way to start than by totally failing anybody and anything involved in non transparent practices?
Of course the plutocracy is dead set against this, because it has perhaps trillions invested in obscure instruments such as credit swaps, through hedge funds. Maybe Paulson wants to save the hedge funds. By U.S. law those funds are reserved to the really Rich in the USA. Saving the hedge funds is saving the Rich, and reciprocally. The U.S. Rich has about two trillion dollars in hedge funds. They are threatened with annihilation. In 1998 the Federal Reserve freaked out and provided huge liquidity just because one hedge fund, LTCM, with just a few billions invested, was threatened. Plenty of powerful friends of the Rich, and the Rich themselves had invested in it.
The basic story with today’s hedge funds is that they invested in derivatives, using huge amounts of money that belonged to the poor. The hedge funds borrowed money to big banks, and now they owe it to big banks. Problem: they invested in mental garbage. Derivatives are bets on the values of whatever, often with no connection to reality whatsoever. So they cannot repay the banks; not really a problem, though, because the banks operated before, in spite of these loans to nowhere.
Proof of the vacuity of it all. The total values of derivatives is above 500 TRILLION dollars, several times total WORLD wealth and GDP. Nothing can be worth much more than the world, except in lunatics’ minds. All these contracts should be voided and declared unlawful looking forward. Because they pollute world finance, hence world’s investing capability.
From voiding all derivatives, two consequences would ensue: 1) many banks would have to admit their capital provisions are insufficient (no big deal: the capital was a fiction to start with, the banks would just have to recapitalize themselves, this is not the first time this happens, there is time). 2) many of the hedge funds would collapse, reducing much of U.S. plutocracy to (relative) ruin (so what? They get finally visited by what they visited on others, and, besides, this redistribution of wealth is absolutely necessary to allow an economic recovery).
P/S 2: On Big Lies. Hank Paulson coolly claimed in front of the U.S. Senate (September 23): “We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. That’s the role of Congress, that’s something we’re going to work on together. So if any of you felt that I didn’t believe that we needed oversight: I believe we need oversight. We need oversight. ”
In truth the Paulson plan explicitly ruled out any oversight, in writing. And granted immunity from any possible prosecution:
“Sec. 8. “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
This is revealing: Paulson made a plutocratic power grab, but now denies he did, while it’s in print that he did. Paulson’s brazen disregard for any standard of logic and decency, in as public a setting as possible, indicates that he probably intends much worse, where it cannot be seen yet. There is now every reason to trust him on nothing related to his bailout plan. Indeed, when someone in public office is caught using the Big Lie technique, that should be it. There should be a law against using Big Lies deliberately, while running for, or holding, public office. That would raise civilizational standards. (Hitler was very clear that his main instrument to get to power was the Big Lie technique.) As usual, the most advanced countries should show the way…
P/S 3: Once a firm has been nationalized, and the previous owners sit with their IOUs, or after having sold big pieces of equity to the government (remember, Congress makes the laws!), the administration of the firm (now under government orders) would be free to open said firm to private capital (to help for further investments without pumping the taxpayers). That method has been used a lot in Europe, with great success, since W.W. II. Ultimately, the firm would be returned to the private sector (in the fullness of time).
P/S 4; The plan proposed above, NATIONALIZE FAILING BANKS, was implemented in Sweden in 1992, very successfully (the Swedish people still owns some large pieces of these banks, such as the giant, very successful Nordea). This obvious solution has been rejected in the present day USA, because the plutocracy holds the minds of the establishment captive with the hope of making good money as long as they are not too imaginative.