Where did George keep the 700 billion dollars, and what was he using it for before he decided to give it to the banks?
Was this 700 billion dollars just lying in a drawer somewhere, in case it was needed?
I’d genuinely like to know.
In the course of writing on this site, I’ve laughed at Church and State, disabled people, black people, white people, straights, gays, Nazis, police incompetence, corrupt politicians and Mother Teresa. Some people didn’t like things I said, and told me so, but the only time I ever received direct, ad hominem insults was whenever I questioned the teachings of economics.
If you do that, you’ll hit a nerve. I have always thought religion was nonsense, but at least, in fairness to the churches, they tend not to wrap their belief systems in a veil of spurious pseudo-science, unlike the priests of the Free Market. Question the basis of the economic system and you’ll be poking at the deepest insecurities known to mankind.
Go on. Try it. Go out there and suggest that market forces don’t exist. Suggest that the market is not amenable to scientific study and that the mathematics of finance is simply a smokescreen to legitimise what is in fact a big bucket of greedy bastards pulling the levers any way they like.
Say things like that, and you know what will happen? People who wouldn’t know a scientific theory from a man-eating crocodile will attack you for daring to doubt.
Very well then. Let’s just examine the details of the proposed bank bail-out.
Over there in the States, and on this side of the pond as well, some bankers have been making stupid decisions, and others have been doing things that are downright criminal. Not only have they been lending money to people who will never pay it back, but they’ve also been accepting valueless property as collateral. That was stupid. Other bankers have been using those loans to generate new money by overstating the value of the properties and understating the poverty of the borrowers. That was criminal.
To get the banks out of the hole they dug, Dubya now wants to buy this big pile of shit debt, using public money, but not everyone is convinced, which is hardly surprising.
To put this figure in context, Dubya wants each man, woman and child in the united States to give the banks $23,000 dollars. This includes every last homeless person, newborn baby and cripple.
You see, the figure of 700 billion dollars is based on the book value of the properties when the banks handed out the loans, but those houses are now worth far less than that. In other words, the banks haven’t adjusted their books to take account of the loss. They want George to give them the money they recklessly handed out before the pyramid scheme collapsed.
The banks don’t want to face the consequences of their stupidity and greed, and George is inclined to help them out. He’s going to buy the worthless properties from the banks for the original full inflated price, which is plain insanity, leavened with a good sprinkling of corruption.
It makes no sense.
Look, there are only two choices:
First, governments can buy the loans at whatever they’re currently worth, which is approximately nothing. Then the banks can go back to basics, halt the bonuses to their top executives, pause their shareholders’ dividends, drop their interest rates and start earning money to cover their losses, just as you or I would have to do if we screwed up a business venture.
Result: the sky doesn’t fall in.
Second, governments can buy the loans at their original price and the banks can walk away from the mess they’ve created with no consequences for their crooked and incompetent executives.
Result: the sky doesn’t fall in either, but the taxpayer gets massively screwed, the exchequer is weakened for years and orthodox economic policy is discredited forever.
Now, if I was a banker, I know which option I’d prefer, but what baffles me is this: why would any ordinary member of the public choose the second option?
But going back to my original question: the money that George wants to give the banks in return for worthless pieces of paper.Ã‚ Where did all this cash come from?
Is the reality even more bizarre than we thought, and is George simply trading play money for play houses?