Saturday, July 4, 2009

this is your captain

We are all still going down.

Bloomberg, in March, reported that the Bush-Obama plan was sailing along quite smoothly. In return for keeping our financial sector number one – and remember, at least one hundred thousand people make substantial money there – the government did the following:

"The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.

New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.

President Barack Obama and Treasury Secretary Timothy Geithner met with the chief executives of the nation’s 12 biggest banks on March 27 at the White House to enlist their support to thaw a 20-month freeze in bank lending.

“The president and Treasury Secretary Geithner have said they will do what it takes,” Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said after the meeting. “If it is enough, that will be great. If it is not enough, they will have to do more.”

Commitments include a $500 billion line of credit to the FDIC from the government’s coffers that will enable the agency to guarantee as much as $2 trillion worth of debt for participants in the Term Asset-Backed Lending Facility and the Public-Private Investment Program. FDIC Chairman Sheila Bair warned that the insurance fund to protect customer deposits at U.S. banks could dry up because of bank failures.
The combined commitment has increased by 73 percent since November, when Bloomberg first estimated the funding, loans and guarantees at $7.4 trillion.”

As we can tell from the line about consumer deposits, this was really about Joe Public! That it had the affect of creating a little bubble for Joe Predator, the hedge funder, and all the guys at Goldman Sachs (we heart you, Lloyd Blankfein!) was an entirely happy accident. And my, what a spring they have had!

The happiness of the million dollar bonus set far outweighs any small misery caused by the destruction of the 4 million jobs since January. The deadweight, as we like to call them, may not have any insurance or any way to cover house payments or little things like that – but they are thrilled and electrified by our proud, proud financial sector, standing tall and giving itself big raises for the excellent job it has been doing.

But there is a fly, a stinking fly and a big one – in fact, it is as big as Manhattan! – in the ointment. Because it is fun to make money playing three card monte with the government. Who doesn’t see how glorious and fitting it is that the Fed loans you money at 2 percent in order for you to loan money to the government at 2.5 or 3 percent. So, so much better than just taking the money from the government by hand – that is just vulgar! It is what welfare mothers do! But as in a ship in which a big big hole has been punched, if the ship’s crew spends all its time making the first class passengers feel secure and tucked into their beds and do nothing about the hole, unfortunately, the first class passengers might well go down with the scum. Oh, it is so, so unfair.

And so that slight, ever so slight uptick in unemployment of one hundred thousand human products has started an uneasy stir. Could it be that the mercy and kindness lavished on the very sector which, in its search for high yield, fucked the globe, could it be that this is the wrong policy?

Of course not! The alternative would have been to turn that firehose of money on the populace, the people if you will, and let’s face it, these are folks who have never summered in the Hamptons! Still, the crazy lunatic left fringe who wrote that all the money in the world is not going to heal the financial sector, and that the Fed should have been making those below par loans to median income household, either through modalities set up in the present banking system or through a bank that was capitalized entirely by the government, are looking like they were right. In fact, they were so right that we aren’t ever going to talk about it – don’t look for any revisiting of Summers remark, this spring, that the “government” doesn’t know how to run a bank.

To sum up: the mangle of inequality is still eating Uncle Sam’s shorts. The astonishingly few people that almost all government activity is oriented to help – we are talking about the financial sector – have shown an amazing amount of political power and an amazing lack of intelligence. Larry Summers, who I said would be a disaster, has proven to be more than a disaster. There are even articles appearing now about how, uh, Summers ideas for making Harvard into the world’s most profitable hedge fund are now threatening Harvard’s very existence – ah, the man leaves a trail of pretty heavy corpses, at least. And we are heading into the second half of the year with NO driver of growth. The magicians have prayed to the idol of the market – a being that is as mythical as the aether – and believe, every one of them, that it is a self-correcting god. These are the words of people who have pickled their brains in the half truths of Econ 101, and pickled their lifestyles in rubbing elbows with the oligarchs.

Put your head on your knees. Put your head in your hands. Put your hands on your head. Put your hands on your hips. He he. This is your captain speaking. We are all going down … together.


May said...

Well, not everyone is concerned. THEY are going down...

Roger Gathmann said...

May, oh, definitely. The idea is, always, let the slags and the laggards be eaten, let them go to the camps, let them be sent to war, God, but let me escape. It never ever works, though. Because we are connected with one another by invisible ties over which we have no control. The economic system is just an aspect of that deeper connection, and I have to laugh that the people who devise the system think they can escape the consequences of the system.

Instead of going to economists, I go to Dostoevsky:

"You see, Alyosha," Grushenka turned to him with a nervous laugh. "I was boasting when I told Rakitin I had given away an onion, but it's not to boast I tell you about it. It's only a story, but it's a nice story. I used to hear it when I was a child from Matryona, my cook, who is still with me. It's like this. Once upon a time there was a peasant woman and a very wicked woman she was. And she died and did not leave a single good deed behind. The devils caught her and plunged her into the lake of fire. So her guardian angel stood and wondered what good deed of hers he could remember to tell to God; 'She once pulled up an onion in her garden,' said he, 'and gave it to a beggar woman.' And God answered: 'You take that onion then, hold it out to her in the lake, and let her take hold and be pulled out. And if you can pull her out of the lake, let her come to Paradise, but if the onion breaks, then the woman must stay where she is.' The angel ran to the woman and held out the onion to her. 'Come,' said he, 'catch hold and I'll pull you out.' he began cautiously pulling her out. He had just pulled her right out, when the other sinners in the lake, seeing how she was being drawn out, began catching hold of her so as to be pulled out with her. But she was a very wicked woman and she began kicking them. 'I'm to be pulled out, not you. It's my onion, not yours.' As soon as she said that, the onion broke. And the woman fell into the lake and she is burning there to this day."

The only way to be pulled up by the onion is to let everybody be pulled up. This is the secret of heaven and hell.

May said...

Sent you an e-mail.