When you Find yourself in a Hole, Keep Digging until you Pop your Head through the Floor of the People's Bank of Beijing

Full disclosure: Dwight, this was too good to leave on your comments page.

In discussing the Iraq war with Dwight from Logic and Politics, I agreed with his assertion that if we're not wanted in Iraq, we should leave them to their mess. Frankly, I said, it never made any sense, other than the cronyistic nature of the no-bid contracts that were going to Blackwater, Halliburton and the like; it was Bush and Cheney's own little Keynesian economics project, which kept the economy from collapsing until . . . well, until it collapsed in spite all the government investment in the private sector.

I don't suppose it had anything to do with the fact that many of the corporations that have profited from the war in Iraq have been outsourcing a sizable portion of their production overseas--a strategy which takes government dollars from our economy and filters it through corporate coffers into reduced payrolls in developing nations, so payroll turnover is spent there, instead of here. Frankly, the the only way they could keep it going here was to convince the Wal-Mart employee that s/he could afford (and deserved) a split-level, five bedroom/three bath house with a Hummer, an Escalade and a pair of snowmobiles/motorcycles in their three car garage.

This is a market correction: in what universe is a cramped, two bedroom, one bath in East LA worth $600,000? A simple rule of macroeconomics is that where supply curves meet demand curves is called "equilibrium." When a market is out of eqilibrium, as it was during every boom we've experienced from George Washington forward, an "invisible hand" (AKA "market forces") has a way of pushing things back into equilibrium. It's not magic, it's just common sense: who's going to spend $600,000, plus interest, for the privelege of fixing their own pipes and paying dues to a home owner's organization, when it costs less to rent, with none of the headaches? So yes, those who appear to be downplaying the economic crises, are correct, this is unequivocally a market correction. The problem with the kind of market correction that we're going through is, how do you stimulate lending when the prime rate is already hovering around zero and most of the potential borrowers are leveraged to the point that they couldn't borrow their best friend's lawnmower? The Keynesian solution, employed during the Great Depression, if used to escape the current economic crisis, will require a level of spending that will make budget deficits under Presidents Reagan, Bush and Bush look like what they never even tried to deliver on: fiscal conservatism.

And capital? What capital? It's all borrowed money--every dime. Remember the good old days when savings accounts would yield 4.1% per annum? It was 3-7 per cent less than inflation, but at least capital was something other than a promissory note. People had savings accounts because they could earn money on them and banks had capital because they didn't expect savings account holders to give their money away.

The solution isn't hard to grasp, but it'll be painful for years to come, because inflation--as bad as it's been--will skyrocket. In order to attract savers, the fed will have to raise the prime rate so that interest rates will pay a reasonable return on savings. All of this will take time and it will cost more just to live than ever before. But when you're in a hole, you have to, at some point, stop digging, even when you're halfway to China and you forgot to bring your trusty ladder. The one thing we have going for us is how many of us wound up in the hole together. It is that "hole unity" shared by all Chrysler employees that made it possible for the company to survive: according to the Los Angles Times, the Union is buying controlling interest of the automaker--not something GM employees could ever dream of doing, even if 21,000 of them weren't losing their jobs.

There appear to be some advantages in being small enough to fail, after all.

Update: so much for an employee-owned Chrysler. According to the Guardian (UK), some hedge fund speculators, such as Oppenheimer Funds, Perella Weinberger Partners and Stairway Capital, whose greed helped to sink the global economy, were holding out for a taxpayer bailout, claiming that taxpayers and unions "were getting preferential treatment." Among banks willing to write off up to 2/3 of the automaker's debts were JP Morgan, Citigroup and, my favorite punching bag of the financial bailout, Goldman Sachs. While Chrysler may survive bankruptcy, their can be no doubt that the hold-outs once again gambled with other people's money and lost--again: by forcing Chrysler into bankruptcy, the holdouts may well be forced to take a smaller settlement than the one they turned down.

Meet the New Boss (Same as the Old Boss): Part II of Ongoing Series

A comic is worth a thousand rants. Suggestion to cartoonist: an ad with Timothy Geithner's picture on the side of the mailbox might have lacked the subtlety that cartoonists aspire to, but it would have also illuminated the continuity inherent in the transition from the corporatist policies from the Bush regime to the same policies, brought to you by the marketing firm of Obama, Goldman and Sachs, makers of Change you Can't Believe in (Since the Democrats are Bought-off Sonsabitches, Just Like Republicans).

We have only four years, independents, to pull someone from our own ranks, promote them and make them competetive against the Two-Parties that have sold us out, time and again.

Cry 'Havock!' and Let Fly the Shoes of Protest at the Dog of War

President George W. Bush was assailed by flying shoes and insults, courtesy of Iraqi journalist, Muntader al-Zaidi. “This is a gift from the Iraqis; this is the farewell kiss, you dog! This is from the widows, the orphans and those who were killed in Iraq!”said Zaidi, to which President Bush replied, "Shoe fly, don't bother me."



President Bush, being the model of calm, cool leadership and heroism, dodged the first shoe, but then as Prime Minister Nuri Kamal al-Miliki moved to block the second with his hand, Mr. Bush lunged forward, catching the second shoe right in the numbers, thus protecting his teammate from being called out and simultaneously putting Zaidi out of the game--at least until someone from Muntader al-Zaidi's team catches one of Bush's team's shoes.

The security personnel that had been waiting on the sidelines rushed back into the game and pummeled Zaidi with their shoes. But Zaidi, who the referrees had clearly called out, was refusing to leave the game. As per the rules, this gave the security detail permission to drag Zaidi out to the hallway, from where reporters could hear him being kicked, beaten and sodomized. While I have no evidence that Zaidi was actually sodomized, Toby Keith, who was on the security detail, had been heard by literally dozens of witnesses as early as 2002, threatening to "put a boot in [his] ass," as Mr. Keith put it, because "it's the American way." There is no report as to whether Keith's Tony Lamas or W. Axl Rose's Doc Marten's were used in the alleged sodomy, but Mohammed Taher, a reporter for Afaq, an independent television station, owned by Prime Minister Miliki's very own Dawa Party, reported that, “he [Zaidi] was crying like a woman.” A source, close to a source, close to a source, who sits in the stall next to Mahammed Taher during his daily constitutional, said that Taher added under his breath that Zaidi would "be shitting boot polish and decorative stitching for a month of Ramadans."

I have no idea how long that is.

It is considered an insult to hit people with your shoes by Arabic people. According to tradition, this places them lower than your feet, down in the dirt, crawling in the sand, wrestling in the mud with 40 impure women, all of whom refuse to wear a head covering. It is the quintessential mid-eastern atomic wedgie, being pantsed in front of the cheerleading squad and being refused a bailout that was less than one-tenth of what AIG asked for and got, no questions asked, all rolled into one. In short, it is one heavy-duty insult.

And you thought Imelda Marcos took her shoes seriously.

Hank "in the Tank" Paulson and the Last Great Bushist Power Grab

The similarities to 9/11 are stark: pass the bill, now! This is not a time for thinking, it is a time for acting! Sadly, we fell for this line twice already. In the House, a meager 66 Representatives opposed HR 3162 (62 Democrats, 3 Republicans, 1 Independent; 9 didn't vote), what would become known as the USA Patriot Act of 2001. In the Senate, Russ Feingold (D-Iowa) stood alone in his opposition to the bill. The whole thing was pushed through Congress by 1:54 PM Eastern Standard Time, on October 25, 2001. Those who opposed the measure were branded "unpatriotic," "bleeding-hearts," or accused outright of being traitors. In doing so, the Bush Administration silenced those who saw this as a cynical power grab. A year later, having failed to capture Osama bin Laden, but with a new interloper to divert the attention of voters, Congress voted 296 to 133 to invade Iraq (81 Democrats helped; 6 Republicans and one Independent didn't). Russ Feingold was no longer alone in his opposition, as 25 other Democrats joined him in voting against the invasion of Iraq in the Senate, which has since been proven to be an unnecessary and costly war: over 4,000 dead, hundreds of billions spent, the United States' international reputation in tatters and the removal of military capital from the threat of a emerging belligerent powers, such as Iran, Syria, Venezuela, Bolivia and Russia.

Then, starting last Monday, the failure of several key financial institutions, resulting , at least in part, from deregulation, including the repeal of the Glass-Steagall Act of 1933. As with 9/11, people were hoping for someone to step forward to save the day. Treasury Secretary Henry M. Paulson's solution sounded a lot like a trick played by Dark Age mystics on a superstitious and ignorant populous during a total solar eclipse: "Grant me power without oversight, and I will bring back the economic sunshine." His proposal consisted of three pages - three pages, stark in their simplicity, horrifying in their cynicism and arrogance, summed up in the now infamous "Section 8" of the proposal:

Sec. 8. Review.
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.

It is perhaps an unintentional coincidence that Paulson and Federal Reserve Chairman, Benjamin Bernanke picked "Section 8," which was, at one time, the rule cited for discharging mentally unfit soldiers from the army. Indeed, the suggestion that the systemic collapse caused by deregulation could somehow be cured by an individual demanding more deregulation, is madness. It has even less rationale when one considers that this is the same, former CEO of Goldman Sachs who raised his company's debt from $20 billion to $100 billion in his 6-year tenure there. Finally, it has been reported that Paulson and Bernanke drafted this astonishingly elegant proposal six months ago, and hence, saw this collapse coming. Their concern, clearly, was not for the taxpayer or for how many innocent people would be hurt through this nightmare, but themselves and their friends and colleagues on Wall Street.

Well, I have a six point plan for what we can do about this mess. Review this, Bushies:

1) By purchasing bad debts, the United States taxpayer gains controlling interest in these firms. Those CEOs who opt out, risking the collapse of their firms will be required to surrender their passports, will undergo a criminal investigation, and may be subject to criminal prosecution and seizure of their personal assets; we do the same thing to drug dealers, embezzlers and child pornographers, and while I wouldn't place what they've done on the same plane as kiddie porn, I personally find it equal to embezzlement and worse than selling drugs. Those who opt in would be given immunity from criminal prosecution. That's their incentive for helping to keep the economy from crashing: they won't go to jail.

2) All executives suspected of having a role in the banking collapse must surrender their passports until they are cleared; those who opt in that are found to be instrumental in the banking collapse will be terminated with no additional compensation (no golden parachutes). Because the taxpayer has essentially enacted a hostile takeover, any contracts between executives and the firms they were employed by are null and void. They get nothing; they can stand in the unemployment line next to the people they sold out.

3) Absolutely no quarter should be given to the housing speculators who drove the housing bubble. If there were a cost-effective way to do so, I would ask for a mandate making them wear a scarlet letter ("A" for asshole).

4) A moratorium should be declared and defaulted home loans should be evaluated. Those home buyers who clearly have no visible means of paying for their homes, or whose homes are clearly beyond their means, should be foreclosed upon. Those who are in affordable homes should have their loans refinanced so that as much money as possible can be recovered. The United States will recover money from the sale of foreclosed homes at fair market value, only. These properties should not be auctioned off or sold at any discounted rate. This will prevent further damage from speculators.

5) All firms participating in the bailout agree to a similar, best-effort financing agreement offered to responsible, but troubled home buyers. In other words, the companies that caused this mess will ultimately have to pay for their mistakes in the years to come. They will be responsible for paying back the amounts of money that the government is short from housing sales and loan payments. There is no reason that the United States should give away the store without getting something back. Agreement to such terms - along with contractual obligations of transparency - could be offered as a condition for some executives to continue their employment in certain cases.

6) The regulatory boards that were gutted by the Reagan, Bush and Bush Administrations will be funded by the payments from the firms participating in the bailouts. There should be additional oversight by Congress to make sure that the regulatory agencies don't wind up in the pocket of the firms they regulate.

If my plan sounds punitive, good: it's humane, compared to what I would do, were I not an employee in a large firm with payroll expenses exceeding $100,000. Were that the case, I would say, let the banks fail and put their CEOs in prison next to rapists, murderers and drug dealers. Secretary Paulson's proposal was a naked power grab by an administration already grotesquely bloated on them. Once again, the Bushists have presented us with a crisis and told us that if we do not act against our own best interests, we are doomed. Fool us once, shame on you; fool us twice, shame on us; fool us a third time and clearly, we are too stupid for the responsibilities necessary to be a citizen of this, or any other Republic.