Government Isn't the Solution . . .
Tom Toles via the Washington Post
Saturday, September 20, 2008 | 05:30 PM | Permalink
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I'm confused. When they say "toxic waste"... are they referring to distressed mortgage assets... or the Bush administration?
Any help on this would be appreciated.
Posted by: TG Randini | Sep 20, 2008 5:47:00 PM
Cue commenters with similar levels of self-unawareness in 3... 2...
Posted by: PeakVT | Sep 20, 2008 5:50:15 PM
I don't agree with this man's anti-minority prejudices, but his views on government spending are right on target. And I know you don't like all this cutting and pasting, Barry. But, damnit, this money spent on militaristic crap isn't for us; it's for that 1% that isn't satisfied with raping the rest of the world. They want to rape us too.
Killing America part eight
September 18, 2008
Don Stott
As has happened with other civilizations no longer in existence, they went by the way, because of stupid expansionism, increases in government size, currency devaluation, and degradation of the populace's morality, education, and ethics. Let's examine one.
Expansionist, militaristic, 'policeman of the world' America, has 737 overseas bases. According to Chalmers Johnson, in a recent article, the military, "Deploys well over half a million soldiers, spies, technicians, teachers, dependents, and civilian contractors in other nations." Huge numbers of billions of taxpayer dollars go to Kellogg, Brown, and Root, a subsidiary of Halliburton, of which we have all heard about with their non-bid contracts by the hundreds. Whole sectors of the American economy have come to rely the military for sales. These sales to the military, of course, are paid by taxes. As an example, the Department of Defense recently bought 273,000 bottles of sunblock lotion.
There are 6,000 military bases in America and its territories. Okinawa alone, has four Marine bases, and has had for 58 years. There are $5 billion worth of military and espionage installations in Britain, which have long been conveniently disguised as Royal Air Force Bases. Some of the foreign bases are so huge, that they require bus lines to transport personnel around in them. Occupants of these bases usually live quite well, at taxpayer expense of course. There are swimming pools, clubs, gyms, fancy restaurants, and of course schools for their children.
Have you heard of a place called Kyrgzstan? There are over 1150 Military there.
All of the overseas bases cost a fortune to operate. Hundreds of billions each month. They are located in places which irritate the natives in most cases. We are indeed being ruined by what Dwight Eisenhower warned about, and that is the "Military-Industrial Complex." While we anger people when we place bases in their lands, we also degrade the dollar continually. Why do we need military bases anywhere in the world, or for that matter hundreds of embassies? Why, Why, Why?
Imagine the expenditures incurred by hundreds of thousands of military stationed overseas, plus the backups, food, supplies, arms, communications, and fuel needed for these bases. They constitutes a great portion of the budget deficit. This doesn't include the wars, which I will cover next time.
Why is silver now only sold in 500 ounce lots? The answer is actually simple. All silver from all mints comes in 500 ounce boxes. If our shipper had to break them down, re-count, repackage, and re-box to smaller portions, they would have to hire more people, and maybe even build a plant addition. You just cannot imagine the volume we are experiencing, and in order to cope with it, it just has to be in 500 ounce lots. This saves lots of expenses, space, and costs. Will you get your silver in a couple of months? Yes. We trust A-Mark, A-Mark trusts the mints, they trust us, and we hope you trust us. If that worries you, you can wait of course, till there can be instant delivery, if ever, but I can only imagine what pries will be then. More and more people every day are switching their assets from paper to gold and silver, and the volume is actually almost impossible to handle. That's why the phones are so busy. We're sorry, but we don't know how to solve it!
Posted by: AGG | Sep 20, 2008 6:00:02 PM
The cartoon is missing one thing; an arsonist wearing the same hat as the fireman, leering from around the corner.
Posted by: nobody | Sep 20, 2008 6:12:25 PM
I think that if this is the worst financial criisi since the 30's, then it´s impossible for the "real" economy not to feel the pain.
so "The" bottom is still to be seen. S&P500__788 by March 09?
Posted by: In cash | Sep 20, 2008 6:19:26 PM
Oh, c'mon, nobody. Government did not put a gun to the heads of every banker, realtor, mortgage broker, bond investor, and flipper who created this whole sorry mess. Plenty of people like the Hudson City Savings CEO (and me) decided not to chase bubbles. That's why Hudson City's market cap is (or "was" -- don't know what it is now after bailout announcements) higher than Wamu's.
Don't be an apologist for crooks by blaming the problem solely on government, unless you want to say the problem was unenforced regulation. At least, make the hat a tri-corner hat, with several logos.
Yes, I'd be glad to be rid of Fannie, Freddie, etc. and, long-term, even the Fed. But, they alone did not create this situation. "Self responsibility" is supposed to be everyone's job. Including the voters.
Then again, maybe that was your point and I misinterpret your post?
...
PeakVT, did I come in on cue?? lol...
Posted by: wunsacon | Sep 20, 2008 6:34:10 PM
"I’m from the government and I’m here to help."
Geezus, what are these "don't tax & spend" folks getting us into?
Posted by: garbo | Sep 20, 2008 6:44:32 PM
the only thing that would really help for next Saturday a year from now is for Tim Tebow to turn pro a year early.
Humbug.
Posted by: Bruce in Tennessee | Sep 20, 2008 6:53:48 PM
Unelect them all, vote anti-incumbent!
Stop rewarding failure.
Posted by: JP | Sep 20, 2008 7:12:48 PM
There are 6,000 military bases in America and its territories. Okinawa alone, has four Marine bases, and has had for 58 years.
Being picky, there is only one Marine Corps base in Okinawa, MCB Camp Butler. The other facilities are designated camps, Camp Kinser, Camp Hansen etc.
Posted by: Brian Dunbar | Sep 20, 2008 7:23:45 PM
Barry,
Why are you hiding behind the curtian with these Auto-Posts? Are you preparing for Armageddon as well? Show yourself!
Elvis
Posted by: elvis | Sep 20, 2008 7:24:42 PM
I'm a devoted reader of the WSJ since I was about 18 because their reporting is so good. The ed page has always been a bit nutty and went completely off the rails in the 90's with articles accusing Hillary Clinton of murdering people etc etc. That said I still read it occasionally when something big is happening. This morning was a beaut. Talk about an irony free zone. With everything they stand for in ruins as the govt spends trillions to bail out markets there was an ed warning us the greatest threat to taxpayer was the govt and Chuck Schumer. Inches away we had Amity Shlaes who rails against FDR and the new deal constantly totally ignoring the greatest business bailout since the thirties and warning markets need to be protected. I really wonder if Murdoch is going to leave this crowd in charge if the Dems win in November. Considering this is the ed page of the most important financial newspaper in America it was surreal.
Posted by: John(2) | Sep 20, 2008 7:34:47 PM
Dunbar | Sep 20, 2008 7:23:45 PM
A distinction without a difference surely.
Posted by: John(2) | Sep 20, 2008 7:37:39 PM
Oh, c'mon, nobody. Government did not put a gun to the heads of every banker, realtor, mortgage broker, bond investor, and flipper who created this whole sorry mess.
The whole sorry mess stems from an ocean of liquidity, an excess of credit, created by the Federal Reserve Bank holding interest rates way below the inflation level for way too long.
Institutions and individuals have had to accept higher and higher risk in order to get any kind of return, because the firehose of liquidity drove interest down and created credit by the ocean load. Add fractional reserve banking to the mix, 40:1 leverage within Lehman/Bear/Mer/MS/GS, and the fire on Wall Street was bound to happen.
Or to put it another way: Alan Greenspan hosed down the house with a tanker load of gasoline. Now it's burning, and that's supposed to be a surprise? The Fed made this fire possible.
Posted by: nobody | Sep 20, 2008 8:05:10 PM
Doesn’t Paulson also realize that:
1. Financial instruments collateralized by sinking real estate will themselves continue sinking. His plan does not address the cause (sinking house prices) of the problem he's chosen to attack (lousy bank assets driving mistrust and dampening bank-2-bank lending). House price deflation will not stop until housing becomes affordable enough to trigger demand by workers at median wages within each residential market. But for now, workers' inflation-adjusted wages are sinking too, and job loss stresses and income losses are increasing.
2. Paulson’s plan is really just an incredible "Jobs Program" for hordes of unemployed Wall Street investment securities guys. Treasury plainly states they will contract this work out to these guys, and it’s a lot of hours-per-transaction with the potential for incredible volumes of transactions.
Surely this is some type of 'In-The-beltway' trial balloon by Paulson.
Posted by: Avl Dao | Sep 20, 2008 8:33:36 PM
The era of small government is over, to paraphrase Bill Clinton.
Here’s something from the days when Republicans were true Republicans and Democrats were fiscally responsible too (well at least relatively so).
From President Bill Clinton’s Radio Address on January 27, 1996
“… The era of big government is over, but we can't go back to a time when our citizens were just left to fend for themselves.
… First, we must balance the budget. In the 12 years before I took office the deficit skyrocketed and our national debt quadrupled.
I came to Washington determined to act, and we did. In the first three years of our administration -- thanks to the Deficit Reduction Act of 1993 -- we cut the deficit nearly in half. In fact, our budget would be in balance today were it not for the interest payments we have to make on the debt that accumulated in the 12 years before I took office.
Now it's time to finish the job. As you know, for some time, I've been working with Republicans and Democrats in Congress to forge a balanced budget that protects our values. Though significant differences remain between our two plans, Republicans and I have enough cuts in common to balance the budget in seven years and to provide a modest tax cut without devastating Medicare, Medicaid, education, and the environment and without raising taxes on working families.
So, again, last Tuesday, I asked Congress to join with me to make the cuts we agree on. Let's give the American people the balanced budget they deserve with a modest tax cut and the lower interest rates and brighter hope for the future it will bring.
…
And while we are balancing the budget, there's another piece of business Congress must take care of right now. Like each of us, our nation is only as good as its word. For 220 years, the government of the United States has honored its obligation and kept its word. Through the Civil War, two World Wars, and the Depression, America has paid its bills and kept its word. When we borrow money, we promise to pay it back and we pay it back -- no matter what.
Our strong economy is built on the bedrock of this commitment. The world's economy relies on the full faith and credit of the United States, and it's one thing that enables us to keep all of our interest rates down, so that we can afford to borrow and grow and live.
From time to time, to keep its word, Congress has had to pass debt ceiling legislation so the government can meet its obligations. Congress has always done this when necessary. But this Congress, especially some in the House of Representatives, are trying to use the debt ceiling as a way to get its way in the budget negotiations.
Since November, Congress has failed to act on the debt ceiling. To prevent our nation from going into default, the Treasury secretary, Robert Rubin, has been forced to take extraordinary actions, and so far he has been successful. But our options are running out.
…”
http://edition.cnn.com/US/9601/budget/01-27/clinton_radio/
And what about that debt ceiling? Is it unlimited now? Has Congress raised it to account for the nearly $1 trillion the government has or will spend attempting to save our economy? Or have W and Hank merely usurped that power too?
Posted by: KJ Foehr | Sep 20, 2008 8:41:14 PM
avi dao, your oint 2 is really insightful. The problem is, it won't work. Even if the Congress can ram this thing through in a week, it will take more weeks/months to staff up. In the mean time, the Alt A Pay Option ARM resets roll on, bringing more No Doc No Income No Job NINJA loans into foreclosure, further exacerbating the MBS problem, further damaging the condition of banks like WaMu and Wachovia, and further driving down the price of houses, pushing more houses into negativ0amortization. It is a spiral. Credit bubbles grow on a feedback spiral, and deflate the same way.
Posted by: wunu | Sep 20, 2008 8:59:03 PM
For some reason this won't post. I'll try it again.
Wunsacon, another example. Expect to hear/read about retirees who put their savings into hedge funds, or auction rate securities, getting all but wiped out. You might claim "government didn't put a gun to their head", but with savings and even CD rates below the level of inflation, they could either lose principle or increase their risk in search of return. They chose the latter, and the risk was higher than they were told, or understood.
It is no accident that lotteries, casinos and other forms of gambling have become so popular; they always do in credit bubbles. It was true in the Mississippi Bubble in France, in the South Seas bubble in England, in the Assignat inflation in revolutionary France, and it's true now.
Credit bubbles always pop. There isn't enough regulation in the universe to keep one going, as Paulson is currently proving. The only way to keep a credit bubble from happening is by not starting in the first place, and when a government gives its currency to a central bank, like the Fed, it only means that the credit bubble will be huge, far huger than any private bank or set of banks could ever create.
The Panic of 1907, a credit crunch, was the proximate justification for the creation of the Federal Reserve system in 1913. Ironically, less than 20 years later, a far larger and more damaging credit crunch occurred specifically because of the Federal Reserve overcompensating for the recession of 1920-21. That credit collapse was the biggest in US history, far dwarfing any of those in the 19th century, because the Fed had far more power than any other bank in US history, and therefor blew a bigger bubble.
Today, we have the Greenspan Fed, which bailed out the market in 1987, drowned a budding recession in 1997 with liquidity, issued more liquidity in 1999 in fear of the Y2K event, and finally reacted to the dotcom crash of 2001 with a tsunami of credit/liquidity that fed directly into the housing bubble.
Housing bubbles take a lot longer to work off than stock market bubbles do, because houses just sit there. The housing market is not bottoming. It won't be bottomed until after 2010 at the earliest.
The Paulson bailout plan will fail, another crisis will happen sometime between November and next March, involving another "too big to fail" institution. No doubt it will be bailed out as well, regardless of who is in the White House. Then another crisis will arise between that one and next August, crushing yet another financial institution. How do I know this? I've read history, and have a basic understanding of credit bubble deflation.
One more time: there should be a guy, with the same hat, holding a gas can in the cartoon.His name is Greenspan.
Hopefull this one will not be considered spam...
Posted by: the artist formerly known as nobody | Sep 20, 2008 9:20:00 PM
Just think, only one more options expiration until the election
Posted by: DavidB | Sep 20, 2008 9:40:09 PM
If the ban on short selling is not modified to allow market makers to short, there won't be an options market functioning by Wednesday.
Posted by: nobody1 | Sep 20, 2008 10:00:40 PM
The financials are BANNED against shorting! Cue the energy stocks...
Posted by: rob.p | Sep 20, 2008 10:16:14 PM
rob p., it is accurate that 799 + 1 + 1 more stocks may not be shorted from now through Oct. 2, with provision to extend the ban for 30 more days. That has nothing to do with the options market. There is also a ban on naked shorting entirely, with no exemption for market makers in the options pits. If that goes into effect on Monday, there won't be an options market functioning by Wednesday.
If some kind of plan is rammed through Congress, whether it is Paulson's or Senator Obama's or something else, the market should hold together through October provided the ban on shorting financials is renewed for 30 days. Note when that extension would expire, and what happens the next day.
After that, some bank is going down. Maybe WaMu, maybe Cit, maybe Wachovia, maybe something else. I'll be very surprised if we get through the end of the year without another crisis.
That's how credit bubbles deflate. Thanks a lot, Easy Al Greenspan.
Posted by: nobody1 | Sep 20, 2008 11:07:37 PM
"Cue commenters with similar levels of self-unawareness in 3... 2..."
Right-winger PeakVT was of course referring to himself. thankfully, no-one followed him up.
Posted by: brion | Sep 20, 2008 11:08:58 PM
I'm confused by so much of the 'leaked' RTC plan...would CDOs also be considered 'assets'? Would 'fair price' be a subsidy over market price? (...any room for definition there like 2002 valuations before the housing market went nuts)...so far it sounds worse for the tax payer than letting things go over a cliff...because it also doesn't look like it will stop any of that....what can I read to help undertand this?
Posted by: woodyy | Sep 20, 2008 11:22:19 PM
von Mises never hurts:
Middle-of-the-Road Policy Leads to Socialism
Introduction
The fundamental dogma of all brands of socialism and communism is that the market economy or capitalism is a system that hurts the vital interests of the immense majority of people for the sole benefit of a small minority of rugged individualists. It condemns the masses to progressing impoverishment. It brings about misery, slavery, oppression, degradation and exploitation of the working men, while it enriches a class of idle and useless parasites.
This doctrine was not the work of Karl Marx. It had been developed long before Marx entered the scene. Its most successful propagators were not the Marxian authors, but such men as Carlyle and Ruskin, the British Fabians, the German professors and the American Institutionalists. And it is a very significant fact that the correctness of this dogma was contested only by a few economists who were very soon silenced and barred from access to the universities, the press, the leadership of political parties and, first of all, public office. Public opinion by and large accepted the condemnation of capitalism without any reservation...
it continues:
http://mises.org/midroad/mrintro.asp
Posted by: Mark E Hoffer | Sep 20, 2008 11:36:27 PM
