Burning down the house?
Government leaders said that massive bailouts were necessary. Were they right?
The New York Times wrote on July 16th:
In retrospect, Congress felt bullied by Mr. Paulson last year. Many of them fervently believed they should not prop up the banks that had led us to this crisis — yet they were pushed by Mr. Paulson and Mr. Bernanke into passing the $700 billion TARP, which was then used to bail out those very banks.
In his latest trend forecast, Gerald Celente writes:
It was the familiar fear tactic — one that had worked in the past and would work again — an economic version of the Bush/Cheney argument for the Iraq War. The people were told that Saddam Hussein had weapons of mass destruction and ties to Al Qaeda. If he wasn’t stopped, the next cloud would be a mushroom cloud.
The pretense was different but the game was the same: instill fear in a panicked public and they will follow their leader, regardless of how shallow the reasoning or how big the lie.
Just as the nation was hurried to war before it could be proven that Saddam Hussein had no weapons of mass destruction or Al Qaeda ties, so too there was no time to debate what might happen if the “too big to fail” failed…
While the national pastime of “follow the leader” is always the path of least resistance, it comes at a high cost … financial ruin and/or war and death. In either case, when disaster strikes, the followers typically absolve themselves of any direct moral responsibility for both the outcome and for the role they played in allowing it to happen.
Celente is over-the-top, right? Tin foil hat time, right?
Well, maybe. But Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn’t passed:
Bait And Switch
Indeed, the Tarp Inspector General has said that Paulson misrepresented some fundamental aspects of Tarp.
And Paulson himself has said:
During the two weeks that Congress considered the [Tarp] legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets—our initial focus—would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.
So Paulson knew “by the time the bill was signed” that it wouldn’t be used for its advertised purpose – disposing of toxic assets – and would instead be used to give money directly to the big banks? But he didn’t tell Congress before they voted to approve the Tarp legislation? Does that mean that Paulson either actively misrepresented the purpose of the legislation or else committed a lie by omission – holding his tongue even though the fundamental idea behind his bill had changed?
It was a bait-and-switch, whether or not it was an intentional one.
The House Next Door
And while I have never heard of Obama and Bernanke’s “house next door” speeches before, Celente does a good job of describing them and then pulling the rug out from under their rationale:
Asked why taxpayers should be forced to foot the bill to bail out banks, brokerages, insurance companies and other institutions that had made bad bets, Mr. Obama responded, “You know, if my neighbor’s house is on fire, even if they were smoking
in the bedroom or leaving the stove on, right now my main incentive is to put out that fire so that it doesn’t spread to my house.”
When asked the same question seven months later, Ben Bernanke resorted to the same illegitimate analogy: “If you have a neighbor, who smokes in bed. And he’s a risk to everybody. If suppose he sets fire to his house, and you might say to yourself, ‘I’m not gonna call the fire department. Let his house burn down. It’s fine with me.’ But what if your house is made of wood? And it’s right next door to his house? What if the whole town is made of wood? Well, I think we’d all agree that the right thing to do is put out that fire first, and then say, ‘What punishment
is appropriate? How should we change the fire code? What needs to be done to make sure this doesn’t happen in the future? How can we fire proof our houses?’ That’s where we are now. We have a fire going on.”
Comparing a neighbor’s house on fire to spending trillions to bail out failed financial institutions is a totally fraudulent, puerile and transparent analogy … one that happened to be accepted without question by the entire media and foisted upon the public as the logic of the wise.
“Smoking in bed” and “the house on fire” bore no relationship to the reality. More to the point, what if your neighbor is a compulsive gambler who lost his fortune in Vegas and is now losing his house? Should the “whole town” be taxed for generations to come so that your neighbor is able to retain possession of his McMansion? And for his gross failures, should he be further rewarded with millions in “executive compensation” so he can travel first class back to Vegas to continue his wasteful, profligate ways?
Preventing the Next Fire
The bottom line is this. If the fire at the neighbor’s house was threatening your house, wouldn’t you want his matches taken away? Especially if he had lit fires that had burned down other houses in the past?
Unfortunately, as I have previously pointed out, Obama’s proposed economic regulations are like a law which makes arson illegal, but exempts convicted arsonists.
The top independent economists warn that the economy will not stabilize – and hundreds of billions or trillions of additional dollars will need to be thrown at the giant banks and financial companies – unless the fundamental problems are actually addressed and fixed. They agree that – to date – Obama, Summers, Geithner, Bernanke and the rest of the boys have not done so.
Indeed, I would argue that the government is actually handing out matches by encouraging the financial giants to hide the extent of their toxic assets (through funny accounting and the continued use of SIVs), restart the shadow banking system, re-lever up, and engage in new types of financial schemes such as securitization of life insurance policies.
As I wrote a year ago, by trying to put out the raging fires of deleveraging, the government was ensuring that they would grow and wipe out the whole forest.
And as former head BIS economist William White wrote recently, we have to resist the temptation to blow another bubble every time the economy gets in trouble:
Forest fires are judged to be nasty, especially when one’s own house or life is threatened, or when grave harm is being done to tourist attractions. The popular conviction that fires are an unqualified evil reached its zenith after a third of Yellowstone Park in the US was destroyed by fire in 1988. Nevertheless, conventional wisdom among forest managers remains that it is best to let natural forest fires burn themselves out, unless particularly dangerous conditions apply. Burning appears to be part of a natural process of forest rejuvenation. Moreover, intermittent fires burn away the undergrowth that might accumulate and make any eventual fire uncontrollable.
Perhaps modern macroeconomists could learn from the forest managers. For decades, successive economic downturns and even threats of downturns (“pre-emptive easing”) have been met with massive monetary and often fiscal stimuli…
Just as good forest management implies cutting away underbrush and selective tree-felling, we need to resist the credit-driven expansions that fuel asset bubbles and unsustainable spending patterns. Recent reports from a number of jurisdictions with well-developed financial markets seem to agree that regulatory instruments play an important role in leaning against such phenomena. What is less clear is that central bankers recognise that they might have an even more important role to play. In light of the recent surge in asset prices worldwide, this issue needs urgent attention. Yet another boom-bust cycle could have negative implications, social and political, stretching beyond the sphere of economics.
Whoever started the fire in the first place, and whether or not there was really a crisis which required bailouts the first time around, the fact is that the government is ensuring more – and – bigger fires in the future.
Want to know what WebBot is?
Find out in this interview that Heinrick Palmgren has with its’ creator, Cliff High!
According to film maker James Fox, if Gary McKinnon had just waited until October 19th, 2009, he wouldn’t be in as must trouble as he is with the American Federal Empire:
Computer hacker Gary McKinnon could be
facing 70 years in prison for hacking into government UFO files. He should
have just waited until Monday, October 19th @ 9 p.m. ET/PT when investigative
filmmaker James Fox (of FCZ Media) provides answers on the UFO phenomenon in
his feature-length documentary I Know What I Saw airing exclusively on The
History Channel. Fox assembled the most credible UFO witnesses from around
the world to testify at The National Press Club in Washington D.C. For the
first time, Air Force Generals, astronauts, military and commercial pilots,
and government and FAA officials from seven countries speak out on national
television, providing shocking evidence that UFOs are real.
Narrated by James Fox, I Know What I Saw traces sightings and reports
worldwide. Testimony includes high-ranking military personnel, pilots and
astronauts from France, England, Belgium, Chile, Peru, Iran and the United
States who all call on the U.S. Government to re-open its investigation into
UFOs – which the Air Force shut down over 30 years ago.
In I Know What I Saw, filmmaker James Fox uncovers new details of a UFO
landing at an American Air Force base in the UK. U.S. Air Force Col. Charles
Halt recently admitted, “In December 1980 I was involved in a multi night
incident where a UFO landed, was touched, photographed and departed rapidly.
Two nights later, five or more intelligently controlled objects, assumed to be
extraterrestrial, returned to the area and were witnessed by numerous people.”
Air Force Sergeant, James Penniston, copied strange markings from the landed
UFO which filmmaker James Fox has analyzed by an expert symbologist for the
very first time. The results are startling.
Senator John McCain and Arizona Governor Fife Symington reveal their efforts
to investigate the infamous “Phoenix lights” sighting. “I believe that our
government should take an active role in investigating this very real
phenomenon,” said Symington, who was himself a witness to the reported mile
wide craft seen by thousands in Arizona while he was governor.
For more information about James Fox and I Know What I Saw go to
I don’t how much truth was gleaned from Fox’s interviews, but interviewing the above listed people would go a long way toward some credibility in the study of UFOs.
But until the subject is studied under the same empirical scrutiny that SETI or others are given, all we have amounts the same as religious stygmata.
Cardiff University experts have led an international team in unravelling the secrets of a 2,000-year-old computer which could transform the way we think about the ancient world.
Professor Mike Edmunds of the School of Physics and Astronomy and mathematician Dr Tony Freeth first heard of the Antikythera Mechanism, a clock-like astronomical calculator dating from the second century BC, several years ago. Now they believe they have cracked the centuries-old mystery of how it actually works.
Remnants of a broken wooden and bronze case containing more than 30 gears was found by divers exploring a shipwreck off the island of Antikythera at the turn of the 20th century. Scientists have been trying to reconstruct it ever since. The new research suggests it is more sophisticated than anyone previously thought.
Detailed work on the gears in the mechanism showed it was able to track astronomical movements with remarkable precision. The calculator was able to follow the movements of the moon and the sun through the Zodiac, predict eclipses and even recreate the irregular orbit of the moon. The team believe it may also have predicted the positions of the planets.
The findings suggest that Greek technology was far more advanced than previously thought. No other civilisation is known to have created anything as complicated for another thousand years.
The History Channel had this device on their Ancient Discoveries show last night. We are now beginning to understand how advanced Hellenistic (Greek) technology was and how it affected the civilizations that follwed it, the Romans, Arabs, Holy Roman Empire, Spain, Britain and us.
It just makes you wonder how advanced our science would be now if the Library of Alexandria wasn’t burned to the ground in early First Milleneum Wars.
Speaking of history, here is a dose of future history that in fact explains how more things change, the more they stay the same:
From Probapossible Prolegomena to Ideareal History by James Blish (1978). Blish expounds upon the historical theories of Oswald Spengler.
Civilizations may last for centuries and be extremely eventful; Imperial Rome is a prime example.
But autumn ends, and a civilization becomes a culture gone frozen in its brains and heart, and its finale is anything but grand. We are now far into what the Chinese called the period of contending states, and the collapse of Caesarism.
In such a period, politics becomes an arena of competing generals and plutocrats, under a dummy ruler chosen for low intelligence and complete moral plasticity, who amuses himself and keeps the masses distracted from their troubles with bread, circuses, and brushfire-wars. (This is the time of all times when a culture should unite — and the time when such a thing has become impossible.) Technology flourishes (the late Romans were first-class engineers) but science disintegrates into a welter of competing, grandiosely trivial hypotheses which supersede each other almost weekly and veer more and more markedly toward the occult.
An attempt is made to buttress this by syncretism, the wrenching out of context of religious forms from other cultures, such as the Indian, without the faintest hope of knowing what they mean. This process, too, leads inevitably towards a revival of the occult, and here science and religion overlap, to the benefit of neither. Economic inequity, instability and wretchedness become endemic on a hitherto unprecedented scale; the highest buildings ever erected by the Classical culture were the tenements of the Imperial Roman slums, crammed to bursting point with freed and runaway slaves, bankrupts, and deposed petty kings and other political refugees.
Doesn’t this sound very, very familiar?
The elites of different eras sure know their sheeple, don’t they?