Boston Gal's Open Wallet

Oh for Pete's sake! Way to drink the kool-aid BG. The government is doing exactly what they should to protect the American taxpayer...and what any individual or corporation would do in the same circumstance.

It's much better to own the stock than just hand them the money to do willy nilly what they want with it and hope that they pay it back. And top it off with the fact that we are only preferred stock owners, and thus have no real say in how the company is run, and it resembles socialism even less.

First you guys whine about them giving a "loan" then you whine about us getting equity. Since they aren't taking the option of letting them suffer the result of their failures (my personal preference) then we have to do something. So what then?

Would that we actually did have true socialism. It'd be a much better country.

 

this isn't a bail-out per se, nor is it socialization.... the equity acquired by the Fed are non-voting shares, while pumping cash and guaranteeing that banks communicate (ie: lend to each other)... the Feds will not have a say over the direction that these banks take, thus would underline that this is not socialization as much as the taxpayer investing in banks with the hopes of seeing a return on their money...

 

I think the use of words like "nationalized banks" and "socialism" are red herrings that obscures the reality of Americas' real economic system.

Banks couldn't exist without the federal government. The fed prints the money that US banks use.

Basically the Faith put into US dollars is NOT based on US corporations or banks, but on the American government.

THe FDIC is socialism, and banks couldn't exist at least in their present form without that huge government backed guarantee.

The fed controls the value of the dollars that banks use, sets the interest rates that they charge one another to borrow money, set up a legal system to settle contract disputes, etc and so on.

To me the idea that America was a capitalist economy is more fiction than fact and has been that way since the start.

Any government intervention or involvement in business is socialism.

ALL Consumer protections, FDA, seat belts, environmental standards, making them label drugs, or food, or etc, all of those things ARE socialism.

In a completely capitalist economy, the Federal government would NOT be printing money, would NOT be involved in business diputes, would not be protecting the environment, would not be guaranteeing bank deposits, would not protect consumers, wouldn't regulate medicine and drugs, wouldn't have a legal system to enforce contract disputes, wouldn't build roads, wouldn't build hospitals, wouldn't do many of the things that we take for granted.

So believe me, America has NOT been a capitalist economy for a very long time if ever, and use of words like socialism and capitalism to describe our economy don't really mean anything, imo.

 

Here's a link to a great cartoon that describes the latest rescue plan:

http://globaleconomicanalysis.blogspot.com/2008/10/essence-of-rescue-plan-in-comic-form.html

It seems like the government is once again penalizing savers in order to keep the whole debt bubble going. In order to support these huge capital injections into the banking system, the government has to do one of three things:

Option 1. Raise taxes, which confiscates our savings directly.

Option 2. Issue new money through the Fed's purchase of US treasury notes, which creates money out of thin air. These additions to the money supply result in inflation, which is an indirect way to confiscate our savings.

Option 3. Hope that foreign or domestic savers will buy the US Treasury notes to support the government's deficit spending without adding to inflation.

Even if Option 3 works, all this money is being used to support fractional reserve lending by commercial banks, which results in a larger money supply, hence, more inflation. So we get the same result as Option 2. Everything is working against savers.

For those who are interested, these ideas have all been worked out by people much smarter than I. Chris Martenson's website provides a 20 lesson "Crash Course" on the economic and environmental forces that are impacting us today. I recommend it highly:

http://www.chrismartenson.com/crash-course

Also, Mike Shedlock's website, where the cartoon is located, provides lots of great insights into what is happening today. His views are similar to Martenson's, so it helps to start with the "Crash Course" to help make sense of Shedlock's blog.

 

Washington Post headline: Bush: Partial Nationalization Not An Abandonment of Free Market

So yes, it is some sort of quasi-nationalism that we have embarked on today. I believe Boston Gal's point is right on - how do we do this on just a temporary basis?

These are very interesting times.

Adrienne - I don't know why you are so hostile to the above post. I did not read anything particularly biasis one way or another in what Boston Gal has been saying during this crisis. The only way you could react so strongly is if YOU have some sort of implied negative meaning attached to works like Nationalism and Socialism.

 

I certainly don't want to attack BG....I enjoy reading the blog. But I don't think Adrienne was attacking her either as anonymous stated. Maybe she's like me and just tired of people criticizing the government now that they're finally trying to do something.

We were all really happy to sit back and reap the benefits as the Wall Street crowd built their house of cards. We read about things like "liar loans" in the paper (or should have). We heard stories about people buying homes and flipping them in a month at huge profits....we even entertained ourselves watching television shows about it. But did we ever contact our respresentativs to express our concerns? I'll bet few of us did. And elected officials were not going to take the punchbowl away while everyone was having such a great time at the party.

We reveled in how great capitalism is while things were going well even though the gains we made were based on leverage, not real gains. And now that we have the hangover, we don't like it. But, at least this time the government is trying to head off a global financial collapse. I for one have no desire to go out and try to shoot squirrels in my backyard for food.

 

Oh no, socialism! We need to weed it out immediately. Let's get rid of those socialist institutions like public schools, town fire departments, town EMS ambulance service, libraries, and roads. Can't have the government managing resources in a way that benefits the common good now, can we?

 

Could we PLEASE get off the "Socialism as Boogeyman" hobbyhorse? I'm disappointed that even BG is infected with the idea that any move toward more government involvement is a move toward socialism. Honestly, if we had a truly 100% capitalist society, BG wouldn't have many of the public services she currently relies upon. I suspect she wouldn't have her current networth at her age, either.

 

Again, it appears Grace has a bias in just the word socialism. BG gave a definition - not a critique!

Personally, I think socialism is a good word. But in general socialism is meant to help ALL of the people. I am worried that the current bailout of banks in the US will only result in helping the richest of the rich. So this partial nationalization is only set-up to benefit the wealthy while the rest of us get little if any benefit from our government money.

People can argue that this will somehow help the rest of us by stabalizing the economy and I can't argue with that. But I can say that this injection of capital has in a very real and concrete way saved bankers jobs, bank employees stock values, etc., etc. - so they are benefiting directly.

 

That article was the second best thing to being a fly on the wall during the meeting. Wells Fargo Kovacevich is right to be upset at the executive compensation limits as he ran his bank prudently and conservatively by not getting heavily involved with subprime mortgages. However, I don't think he will have much sympathy from his fellow citizens who are facing job losses, pay cuts, higher medical bills and foreclosures. By the way, does anyone know why Wells Fargo needs capital infusion when it is being touted as a 'sound bank?" Is it because of the Wachovia purchase or is it involved in credit default swaps?

 

The way for the government to get out of its partial ownership of banks (which I think is icky but needed) is for it to re-privatize them, meaning to sell its interest in them to a private entity, after the banks are back on their feet.

That is what the Swedish government did after it bought partial ownership to bail out banks in its financial crisis.

http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html

Later, the Swedish government resold the assets and ended up losing much less taxpayer money than it appeared it would lose at first.

There is no guarantee that will happen in the US case, but in this case, the alternative to socialism is just giving taxpayer money to the financial institutions with no possibility for the taxpayer to benefit when things get better. That's just insanity and creates moral hazard by the bucketload.

 

what's the big deal? the u.s. system has never been a true -ism or -ocracy or any other theoretical system of finance or governance to begin with. We haven't even been a true free market economy. We are a market economy, but far from free. We impose tariffs, we subsidize, we have bailed out companies before, we have nationalized-like companies (intel, defense industries, etc, protected and tech exportation limitations due to national security reasons), we guarantee savings through FDIC, etc. moreover, is stock ownership in banks really nationalization? not really, but again, it doesn't matter.

to start shouting danger, danger, because of words like nationalism or socialism is just meaningless rhetoric amplified by a down economy during a presidential election. People really should start to analyzing things a bit more, especially when it comes to our "current crisis".