Saturday, March 21, 2009

Buenos Aires on the Potomac

“I remember I was very sad for many days when I discovered that in the world there were poor people and rich people, and the strange thing is that the existence of the poor didn’t cause me as much pain as the knowledge that at the same time there were people who were rich.” - Eva Peron.

I extract that quote from Naipaul’s famous, ferocious account of Argentina in the seventies. Naipaul, an anti-third word-ist, a cultural conservative, got many things wrong about Argentina – as an outsider, he knew nothing of the opaque, wheels within wheels relationships between the Monteneros, the Army, the rightwing Peron groups, the left wing Peron groups. What he got right, however, was the crumbling on the surface. Famouly, the Buenos Aires paper that excerpted the report was shut down for printing this sentence about Eva: “She was the macho’s ideal victim-woman – don’t those red lips still speak to the Argentine macho of her reputed skill in fellatio?” The question is pitched at a fevered degree appropriate to the times.

The U.S. fights its dirty wars outside its borders. But suddenly, inside its borders, the cracks have suddenly appeared. We wake up, go outside, and where the street used to be, there is now a crack in the earth. We walk up to it and peer down into its depths, and there’s no bottom. And then we look up and we notice the crack is running through houses, through playgrounds, through the neighbors. And look at our hands, at our legs, and see the crack beginning there, too. Will no one free us from this crack? We would cry, but the crack’s got our tongue.

In one of the sicker stories of this year, the NYT has published the Plan put forth by our own Peron, Obama, the man of hope, to help us get rid of the crack. He has, as expected, under the power of his soothsayers, Geithner and Summers, thrown in his lot with the hopeless, hapless rich. He has taken under his wing the entire Paulson plan, and made it even worse. There are only two things to say about this. The plan stinks to high heaven. And the plan won’t work.

Let’s go firstly to the plan’s unworkability. James Galbraith’s article in the Washington Monthly this week was much swapped around the blogosphere. Galbraith – like, I should say, myself at Limited Inc – sees pretty clearly that we have stumbled into a crack that can’t be normalized away. The mangle of inequality has broken.

As in all seemingly slowmo economic disasters, the ironies abound. They reproduce like fucking bunnies. Here is the irony of the plan: because the soothsayers, Geithner and Summers, have decided that it is God’s word that the government can’t run financial institutions, they have decided to set up, God help us, a non-market for toxic assets.

It will look like a market, but it will lack the one thing that makes markets work – a robust price mechanism. Long ago – back in the dim, drear days of October – I offered, for free, the key to the mysteries here. It is – o America – the magic of the market place. Rather than an OTC peer to peer system for “trading” securities – the whole derivatives/options set of instruments – the government should then and there have set up an institutional marketplace, built much like the Stock exchange, for the public exchange of all securities. They should have given the institution building a certain window of time – say six months – and they should have calmly made it the case that any securities traded on the OTC system after that time would be null and void in these here states.

Well, Weltgeschichte and me, we go way back. I give out the keys, and find no takers. I would have gathered Jerusalem under my wings like a chicken gathers her chicks, but the chicks are stubborn, and insist on getting their little necks wrung. So be it.

I’ll throw out another key, here. Putting the falling financial institutions into receivership and making the Federal workers credit unions into the core of a tax funded bank to provide the necessary credit – along with the many, many surviving local banks, and some national banks – is the only way to avoid the mounting disaster of what is happening to the productive segment of the economy, here and abroad. The attention and money lavished on the financial sector is wholly and completely on account of the wealthy. In the end, this sector has to shrink, and will, as Galbraith vaticinates, be dormant for many a moon. Too bad we plugged our social insurance into the monster.

Now, onto the first part of our objection.

The rich – the AIG Bonus babies, for instance – have exuded around themselves such a hard cocoon that this reality can’t, as yet, penetrate it. There’s a sad tale to tell about such cocoons from history: it is that they get crushed. Eva Peron’s sentiment – Nemesis taking wing in her ghostwriter’s ghostly, deadly words – is being energetically enkindled by the “progressive” sector who see in Obama a return to Clintonomics, except this time, with better health care. I have watched in disbelief as such litmus test figures as Ezra Klein and Matt Yglesias fumbled over the uproar about the AIG bonuses – that “distraction”, as they call it. It is distracting, as only reality can be distracting to the man inebriated with ideology. Just as in other forms of inebriation, in this state, the ground itself sometimes comes up and smacks you in the face – and you wake up the next morning with bruises, if you are lucky, or no teeth, if you aren’t, or even dead in your own vomit, if you are very, very unlucky.

“An attitude to history, an attitude to the land. Magic is important in Argentina; the country is full of witches and magicians and thaumaturges and mediums. But the visitor must ignore this side of Argentine life because, he is told, it isn’t real. The country is full of estancias, but the visitor mustn’t go to that particular estancia because it isn’t typical. But it exists, it works. Yes, but it isn’t real. Nor is that real, nor that, nor that. So the whole country is talked away, and the visitor finds himself directed to the equivalent of a gaucho curio shop. It isn’t the Argentina that anyone inhabits, least of all one’s guides; but that is real, that is Argentina. “Basically we all love the country,” an Anglo-Argentine said. “But we would like it to be in our own image. And many of us are now suffering for our fantasies.” A collective refusal to see, to come to terms with the land: an artificial, fragmented colonial society, made deficient and bogus by its myths.”

We are all Argentine now.

PS - the clever name for this plan should be: the inverse Madoff plan. First, they tell you that they are committing a fraud, then they ask you to invest in it. And since your money is captive to the Treasuy, you don't have a choice! Lovely, lovely, altogether.

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