Lindsey Graham said that if the way the porkulus was passed is bipartisanship than we’re screwed. And we all know Senator Graham knows how to be bipartisan.
I’m trying to find the clip where he said this bill makes Americans want to throw up.
Here’s Senator Graham saying nationalization of the banks shouldn’t be taken off the table. That makes me want to throw up, how about you? I’ve never seen such a wide grin as the one Senator Maxine Waters sported after that comment.
It is a tough issue. The way I see it there are three main ways we can deal with this:
We can do nothing. This is high risk in the sense that if the banks fail, the government is obligated to pay for most of what the banks lose (FDIC guarantee of 250k per account), so if they fall, we pay anyway. As for if they will fail; deflation causes defaults, which causes bank failure; inflation higher than interest rates makes the banks lose money on all of their loans. Due to fractional reserve lending, this means they will fail if the economy is at all unstable. Seeing how we just doubled our money supply last year, this is pretty much going to happen. A failure of the banking industry impacts lending, which is central to the Ponzi schemes that are most modern businesses, and to the housing market. If everyone has to buy their houses with cash, the price is either going to fall a lot farther, or they are going to be bought by China.
We can do what we are doing now, which is leave them private and give them money, which they will abuse, both due to human nature and greed, and due to it being in the banks best interest to hold the money as long as the dollar is gaining value (which it has been since the bailout), because using it causes inflation (see dilemma above). This is just meddling, and isn’t healthy for anyone.
We can nationalize the banks. It wouldn’t be the first time, and it would give the government the leeway to adjust the system without fear of conflict of interest in the private sector. Obviously, the government has its own problems with inefficiency and corruption, and this essentially gives a competitive advantage to those banks which are subsidized by the government (as does our current meddling in which we have seen bailed out failures buy up successful competitors).
The problem is that we are so deep in this Keynesian lunacy, that switching systems guarantees a crash. What are we to do?
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Very good points, Steel. The market recognizes all of this which is why it’s been so volatile. Employers and businesses recognize it which is why they’re laying people off. People like you and I recognize it which is why we stopped spending money. If the politicians had spent a little less time talking down the economy things may not be so bad right now. What a mess we’re in.
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It could also be argued that they talked up the economy. When we were booming, they encouraged it. Bush recognized the need for devaluation of the dollar in order to boost manufacturing and reduce our trade deficit. he planned to accomplish it by getting more people to take out mortgages on homes. The fractional reserve lending system creates money with every loan. He failed to realize that we cannot unilaterally inflate in a global economy when our currency is based on value relative to foreign currency. When the market saturated and housing prices started to drop, officials panicked about the possibility of foreclosures and cracked down on lending practices, ensuring that no one could get a loan unless they could prove they didn’t need it. This tanked the housing prices and caused the very foreclosures they intended to prevent. People who would have gladly sold their homes or refinanced were forced to foreclose instead.
It isn’t that they talked it up or down, but that they did them backwards. If they had tightened lending during the boom, we never would have been in the position to bust. Talking up the bust and down the boom makes me wonder if they wanted us to crash (see my conspiracy theory post). Fixing the economy isn’t all that hard. The tough part is getting everyone to agree on where we want to be.
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