September 25, 2008
What to do?
It was trebles and red braces all round earlier this week when George Dubya announced in that grave and certain way of his that the Federal Reserve - otherwise known as the nation's nest egg - would be bailing out his penniless banker friends to the tune of a mere £378 billion - or £378,000,000,000 (that's $700,000,000,000 to Faddy) to use all those important "0s".
And all because those banker friends just couldn't stop laying debts on how badly they thought their other friends' investments would do...
But then he took his bold idea to Capitol Hill, and they told him - both his own (Tory) Republicans and the (Labour) Demoracts - to effectively sod off while they thought about what was far from a cut and dried answer to the current woes.
Both sides were saying, between the lines: Are we really going to let these red-braced wankers off the hook that easily by guaranteeing their criminally-insane gambling against the nation's family silver?
(NB - the UK has no more family silver (or gold reserves, as they were known) as Gordon Brown sold them off cut price years ago to keep his books looking healthy)
So now Bush is desperately trying to sell the idea to them. After all, it's his wealthy banking, oil and general commerce friends that are most affected by this.
Surely we can't let the rich suffer, eh?
Interesting fact, gleaned from Private Eye: Part of "bankrupt" US investment house Lehman Brothers has been "saved" in a $7bn "rescue" plan. (I love the dramatic language they use for this bollocks - like these people are shivering in dingy tower blocks, dying from dysentry and starvation and all other things actual "poverty")...
...yet, in 2006, the self-same Lehman Brothers paid out $8.7 billion in bonuses alone to its traders.
Who's organising the collection?
HektorRevisited
I listened to an interesting interview on TVN24 (24 Polish News Channel) where an economics professor was arguing that government intervention is not the answer, given that the current mess is the fault of governments themselves. How so? Well, he argued that Central Banks (influenced by the Fed in the US) around the world thought that they had beaten inflation and kept interest rates too low, resulting in: (a) cash becoming so cheap to obtain; (b) banks being unable to make a profit from simply lending; and (c) customers being unable to make profit by simply keeping money deposited in banks.
The result was: (a) cheap money was borrowed and invested in real estate which created an asset boom (that was ignored by the Central Banks, as certain asset prices do not form part of the criteria for calculating inflation (note that in 1997 when the Bank of England was granted 'independence' by Brown et al, the inflation target handed to the banks was based, not on the RPI (retail price index) but on the CPI (consumer price index), and the RPI was traditionally higher than the CPI as it took into account more variables/commodities)), that could have been countered by governments/central banks through higher interest rates; (b) banks seeking profit through increasingly complicated investment structures; and (c) consumers using either real estate as a form of investment for profit and/or turning to complicated investment structures as a means to achieve profit.
So, according to this argument, the intervention of governments now is too late. The problem was caused by inaction of governments and central bankers. Governments, in particular, should be blamed for allowing this particular asset boom and its consequences.
What shall we do with the drunken sailor? I've not a clue, perhaps there is a long boat to put him in (until he's sober).
Best wishes.
Hektor and his Falcons.