The Long Crisis

Posts Tagged ‘Paul Krugman’

Good News readers. Really good news. The global financial crisis, especially the one centered in the USA, is no more. Ben Bernanke, Tim Geithner, President Barack Obama, Paul Krugman, the IMF wonks , and every other big shot muckity muck financial “expert” and talking head says so.

You can now relax and wait for the recovery to set in and all will return to normal. The corrupt, self serving, brain dead leaders of the world’s financial system insist that we have nothing to worry about. The bubbles are under control, the unsubstainable will go on forever, and the con game is working at full court press mode. Wait! It’s even better than that. The bubbles are in the process of being reinflated and will become bigger than ever.

From James Howard Kunstler’s blog comes this further clarification of this exciting news:

“All this goes to show is how completely the people in charge of things in the USA have lost their minds. They seem to think this mass exercise in pretend will resurrect the great march to the WalMarts, to the new car showrooms, and the cul-de-sac model houses, reignite another round of furious sprawl-building, salad-shooter importing, and no-doc liar-lending, not to mention the pawning off of innovative, securitized stinking-carp debt paper onto credulous pension funds in foreign lands where due diligence has never been heard of, renew the leveraged buying-out of zippy-looking businesses by smoothies who have no idea how to run them (and no real intention of doing it, anyway), resuscitate the construction of additional strip malls, new office park “capacity” and Big Box “power centers,” restart the trade in granite countertops and home theaters, and pack the turnstiles of Walt Disney world – all this while turning Afghanistan into a neighborhood that Beaver Cleaver would be proud to call home.”

To learn more about the financial crisis being called off go to Kunstler’s Blog. Don’t miss it, James is in rare form today.

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Columbia professor Joseph Stiglitz is the latest to dismiss the idea that Geithner’s banking fix is a “win-win-win.” Instead, he describes it as a “win-win-lose”: Banks win. Investors win. Taxpayers lose.

As I’ve previously discussed under the Geithner plan as under the earlier Paulson plan the real sticking point is the evaluation of the crappy bank assets that Geithner and I’m sure the bankers want to get off the bank’s books. The objective is to find a way to pass the largely worthless assets along to taxpayers without the taxpayers realizing that they have been once again been raped.

Geithner’s plan would accomplish this magical act by setting up an auction system whereby private investors would partner with the government and bid on the banks toxic probably nearly worthless assets. Investors would have to put up very little of their own capital, about 7.5%, and the government would provide the balance as well as provide guarantees that would protect the investors from substantial losses.

What is really going on here is that the Geithner plan would create an artificially high price for the crap assets as the investors would have very little of their own funds at risk and might take a flyer on the possibility that some day in some way the crap assets take on a shine and can be sold for more than they paid for them.

So who is the loser here? Why the American taxpayer, silly, yes again. As with the AIG funding disaster the “save the worthless insolvent banks” crowd, led by Tim Geithner, is saying that one day the taxpayer will make a profit on these deals. That will be the same day that elephants take over the skies.

As stated in the BusinessInsider “The Obama administration still claims to care about ideas, however–to weigh counter-arguments carefully every time it develops a policy decision. So now that not one but two Nobel prize-winning economists have come out in the pages of a liberal publication to condemn the administration’s plan as a gargantuan, disguised theft, will the administration finally at least explain why it thinks Messrs. Stiglitz and Paul Krugman are wrong?”

Joseph Stiglitz and Paul Krugman both say that the Geithner plan is just plain robbery. Once again under the guise of a bailout plan a back door operation will be put into operation that will transfer billions of taxpayer dollars to Wall Street and the favored big banks. Tim Geithner and President Obama should be careful.

At some point the public is going to catch on to all of this robbery and not wait for elections to make their displeasure known. The prospect of violence and civil disorder in America is growing with every bailout plan.

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