In news today, little George has decided that Wall St needs another helping hand courtesy of the US taxpayer to the tune of $700 billion! In a most remarkable turn of events I even heard a professional money man on ABC radio describe this little event in terms of privatising profits and socialising losses. It seems that with figures this big even dyed in the wool capitalists are choking on their American Express cards.
If this measure gets the thumbs up the US taxpayer will be stumping up for over a $1000 billion to help the stock market avoid a serious structural adjustment. That’s a lot of money and as I said before, you could do a lot of other thing with that sort of money, a theme echoed in today’s Crikey by Jeff Sparrow. But what is really staggering is not only is this money going to bail out the uber rich, it actually returns absolutely nothing of value to the people (ie the taxpayers) coughing up the money. A trillion dollars of losses get transferred off the books of businesses that have been doing some transparently fucked up things onto the balance sheet of the US taxpayer. This is equivalent to adding $20,000 of debt to every american!
George Bush, not content with ripping of the US taxpayers with his highly commercialised and singularly stupid War in Iraq, has just added another massive debt to the american people. I guess they did vote for him, so it just goes to show what can happen in a democracy. Maybe George could pop the ranch up as security? How Alan Kohler on tonight’s ABC news managed to avoid the implications of this little bit of bookkeeping whilst he was waxing lyrically about the recovery in stock markets around the globe is completely beyond belief. Are these people all living in an alternative reality? This is utterly crazy stuff.
Footnote: In case you can’t read Crikey, here’s the text (I know copyright breach blah blah - get over it this is a one off)
We’ll bail out Wall St, but let’s leave climate change to the market - by Jeff Sparrow
A few months back, The Australian gave the weekly column it allocates to climate denialists to the Czech Republic’s Vaclav Klaus. Klaus explained that “climate alarmists” needed “to learn the uncompromising lesson from the inevitable collapse of communism 18 years ago. It is not about climatology. It is about freedom.”
This was simply a reiteration, in slightly more trenchant tones, of the consensus dominating Western politics for the last two decades. The NYT’s Thomas Friedman coined the splendidly incoherent metaphor of the Golden Straitjacket to describe the neo-liberal orthodoxy he and everyone else saw as both desirable and inevitable. The Market gives. The Market takes away. Blessed be the name of the Market.
Hence Klaus’ denunciation of climate advocates. By trying to impose environmental regulations, they were, he said, bucking the market and its wisdom, arrogantly assuming they were better judges than “millions of rationally behaving men and women what is right or wrong.”
Silly them.
But one wonders what Klaus makes of that communist George Bush as he embarks upon what The San Francisco Chronicle calls “the biggest socialization of private assets in U.S. history”.
At first glance, the scheme to outlay a dizzying $700 billion on illiquid mortgage assets seems like the deal that Jack might have embarked upon just after trading the family cow for some magic beans.
But it all depends on your perspective.
If you’re Richard Fuld, the chairman of Lehman Brothers, what’s not to like? You get to keep your Greenwich mansion, your Park Avenue co-op, your estate on Jupiter Island and the $40 million you earned in the last year alone. Not only do you face no penalties or recriminations, the government whisks away all the losses for which you and your pals are responsible, and dumps them squarely on the laps of everyone else.
The Calculated Risk blog puts it like this:
Unless there is a dramatic change, there will be no upside participation in the financial companies for taxpayers, and the taxpayers will recapitalize the banks by, in Krugman’s words, ‘having taxpayers pay premium prices for lousy assets’.
We’re talking, in other words, about a huge transfer of the liabilities from some of the world’s richest people to ordinary American workers, who will be handed something like a $20,000 debt each. Despite the Chronicle, this is not a nationalisation in any traditional sense, since the population doesn’t actually receive anything for their money.
Rather than becoming more transparent, the financial sector seems about to become less so. As Newsweek says, “The prospect of unelected officials putting massive amounts of taxpayer resources to work without transparency or approval from Congress, and without a clear process at work, is indeed troubling.”
Really? But it worked so well in Iraq!
Speaking of which, the $700 billion this little bailout will cost is, as many commentators have noted, roughly the same as the more conservative estimates of the bill for the Iraq war.
So that’s where we are. President Bush and his supporters can find $700 billion to spend on a war of choice. Almost overnight, they can stump up an equivalent amount to stop Adam Smith’s invisible hand from throttling their shonky cronies in the banking sector. Such extraordinary sums, if devoted to public transport or alternative energies or scores of other socially useful outlays, would go a long way to ending America’s dependence on carbon fuels.
Yet, when it comes to climate change — which, like, only threatens the viability of the one planet we have — there’s no option but to let market forces do their work.
Future generations (if indeed there are any) won’t know whether to laugh or to cry.
