"Open Mouth Buddha, shedding Black Tears" Click for LARGE.
2007, Gallery #19, # 6915 - Kazuya Akimoto Art Museum.
It's Over -- We lost.
Obama and Pelosi made damn sure the bill passed.
Thanks Gidget. We sure appreciate that.
Congresswoman Donna Edwards says Obama personally promised her, in exchange for her "Yes" vote, that they would revisit the bankruptcy provisions later. We shall see. I think the Congresswoman, whom I respect, is placing WAY too much faith in Obama, and not enough faigh in his demonstrated history with FISA.
That there is no bankruptcy provision now, means there won't be one later. Obama will apologize, and that will be that. I'm holding 2:1 odds for friends (so don't write, trying to get some of my action.)
I give you the wisdom of Ian Welsh.
FiredoglakeI hate that the plan lacks bankruptcy revisions.
Fundamentally it's the Treasury Secretary to spend pretty much as he chooses, with meaningless oversight, up to 700 billion or the debt limit. In theory it's "whichever is less" in practice it's going to be "whichever is more". Add to mark to the end of mark to market, and the move to mark to "whatever the bank says its worth" and banks are going to be allowed to stay alive no matter whether they're solvent or not as long as their cash flow doesn't go so far negative it can't be papered over the world's favorite wallpaper, the US buck. Zombie banks plus all the money flooding into trying to stop deleveraging from wiping out said financial institutions means this is a Japanification plan.
Japan had its own bubble back in the 80's. When it popped the Japanese decide that they would not force banks to write down their losses. Instead they left them on the books. Those of you who are old enough will remember when Japan was the economy of the future, who built the best stuff and were destroying everyone else. After the bubble popped that all ended. The world's most vibrant economy went into a long economic slump from which it never recovered. This wasn't a classic depression—there wasn't a huge immediate contraction. Things just generally got lousy - unemployment rose somewhat, jobs stagnated, no one had a lot of money. The good times never, ever, came back ever again. It was like being caught in a low grade recession, all the time.
That's what this bill will do in the most likely scenario. The US will go into recession, every once in a while it will seem to pop out, then it will drop again. Because the US has population growth, and Japan doesn't, the actual numbers will look better than Japan's, but the feeling of "there are no jobs anywhere" and "this economy sucks" will be pervasive. This will translate into a grinding down of Americans standards of living.
The reason this happens is that all the money that could be used to increase output and productivity or to decrease input problems (by, say, reducing the amount of oil and other commodities used) will be all be being used to prop up the current financial structure. 750 billion dollars, and this is key, is not going to be enough. Folks on Wall Street are already saying so. More money is going to keep flying into the structure to keep it from deleveraging in an uncontrolled fashion, and thus wiping out lots of rich people. I figure they'll be back for more money in 6 months, 9 max. 3 months wouldn't surprise me, since Paulson has a lot of incentive to use up his full allowance while he's still Secretary. After he does so the problem will still exist and the next Treasury Secretary will be back looking for more.
Now, if that money hits the real economy in a significant way, it will lead to inflation, and in my earlier writing that's what I figured would happen. But on consideration, I think the downturn in the economy combined with the sheer sucking power of the leveraged financial structure which has to be kept from collapsing means that very little of that money is, in fact, going to get to the real economy and what does won't be sufficient to overcome demand contraction. Simply put, the financial masters of the universe owe more money than exists in the entire universe. So their need is going to be pretty close to endless. 10 years minimum, probably 20. Maybe 30. Who knows... but certainly not a one time injection. If 700 billion was their total losses, they wouldn't actually need a bail out.
Note that Japanification was always the plan of the "neconomy", or Busheconomy if you prefer. It was always the endgame? Why? Because Japanification makes the winners of the final game permanent. All extra money in the system will be pumped to the people who made the bad decisions that crashed the prior economy, they will stay in power and because there isn't a dynamic economy left, no one is likely to rise to replace them.
If you are bankrupt, you will likely lose your home.
Get screwed over because you lose your job, a big chance in the economy we're about to have, lost your home.
Uncontrolled medical expenses and have to go bankrupt? Lose your home.
Or go underwater on your home mortgage because of the sub-prime crisis... LOSE YOUR HOME.
This plan bails out the same assholes who created the problem, but does NOTHING to protect you. YOU get to pay the bill. So do your children and grandchildren.
OPEN THREAD on the bailout.