Tuesday, October 14, 2008

Nantucket Nectar

In the short term, the efficacy of the government's plan to buy stakes in major banks is clear. The stock market's performance since the lows last week is a good indicator. And in terms of the financial system's immediate stability, it might be the best option. But there's a larger reality that's become unavoidable. Any system that, after barely a year of unpleasant consequences, resorts to taking money from teachers, doctors, cops, farmers, scientists, and small business owners and giving it to people like this is not only fatally flawed but deeply immoral. And the more immoral and desperate it gets, the more important it will be to punish those who balk at participating. With deflationary factors temporarily and partially supporting the dollar, that's less of an issue in the short term. But going out a year or two or five, the inflationary consequences of the government's current actions are going to knock your soon-to-be-unaffordable socks off. That would be true even if someone with this record could be trusted to adjust monetary policy in a timely fashion.

To the extent the overused term "military-industrial complex" actually describes a set of distinct interests, and to the extent those interests have skin in the current electoral game, the issue of punishing "balkers" is important. Part of the Right's lasting enmity for Jimmy Carter was his geopolitical fecklessness -- especially vis-a-vis Iran -- in a terrible economy that was defined primarily by inflation. In other words, he didn't use the military to enforce dollar hegemony (whether he could have so soon after Vietnam is another subject). The government's response to the financial crisis will be extraordinarily inflationary, and foreign nations that profit from and/or resist that will represent an even greater threat than they have recently. For those whose worldview is defined by natural resources and currencies and the unfettered ability to print money for bailouts -- in other words, those who have benefited from and been responsible for the past eight years -- the prospect of a saner foreign policy come January is a nightmare.


Anonymous goldhorder said...

Excellent post. I have the same nightmare vision for our future. I can't get my hands on silver and gold fast enough.

10/14/2008 2:31 PM  
Anonymous e. nonee moose said...

Let me rewrite this for you and in doing so, predict the future.

Part of the Right's lasting enmity for Barack Obama was his geopolitical fecklessness -- especially vis-a-vis Iran -- in a terrible economy that was defined primarily by inflation. In other words, he didn't use the military to enforce dollar hegemony (whether he could have so soon after Iraq is another subject).

There ya go!

10/14/2008 3:31 PM  
Anonymous goldhorder said...

But....I must make one point. Carter did cave.I mean...basically the Carter Doctrine is our current foreign policy roadmap is it not?
It's our oil and you damn natives can go screw urselves. LOL

Let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.

10/14/2008 4:00 PM  
Blogger J. said...

And here I thought you were going to be discussing new millennium Kool-Aid. Nantucket Nectar, indeed.

10/14/2008 5:27 PM  
Anonymous KAIMU said...



The "paper shufflers" get trillions and those who actually produce "real wealth" by manufacturing a product that benefits the masses get THE BILL!

I am a small business owner and I guarantee you I did not benefit one bit from the $700bil BAILOUT PLAN or the 963 point DOW rally yesterday! Most people in America DO NOT benefit ... only the 5% at the TOP!

The problem that needs FIXING is not the CREDIT CRISIS or BANKING CRISIS because those are always being visited upon us so long as our monetary system remains corrupt. The REAL problem is the US TAXPAYER has absolutely ZERO/ZILCH representation in Washington DC or the Pentagon! That is how it has been all my life ... The top 5% OWN our government not the lower 95% that pay for it!


10/14/2008 6:44 PM  
Anonymous Anonymous said...

Two things:

a)Does anybody remember emergency weekend meetings, Fed rate cuts, Treasury bailouts when the rustbelt was losing 21 million jobs?

b)Go back and look at the Goldman Sachs chart... Paulson wasn't worried about this mess until GS was cut in half in about a week. Next thing you know he's decided it's a crisis, we need a $700B bailout, etc. He even stirred up the President enough to scare the heck out of the remaining few citizens that hadn't been paying attention.

"Never have so many owed so much for so few..."

10/14/2008 9:58 PM  
Anonymous Anonymous said...

Didn't the French execute their traitors after WWII?

10/14/2008 10:42 PM  
Anonymous Anonymous said...

Deeply immoral and thus fatally flawed, perhaps-

10/15/2008 10:34 AM  
Anonymous Anonymous said...

Thanks for giving voice to a thousand anxieties, but I wonder if you have even scratched the surface. I was an early Obama supporter and remain so today, but it seems clear that, as is typical, because he will enter office with the usual baggage of promises made and debts owed, he will be hard-pressed to lead us to the kind of change we really need. Rather, the reordering of our country's priorities and needed re-making of so many of its institutions is going to require an even greater catastrophe than what we've endured thus far. Moreover, only a third (or fourth) political party, relatively unencumbered, can transition us to this new reality. Most important, Americans will need to reconcile themselves to the loss of their unsustainable standard of living and selfish behaviors. But few are ready to accept this stark truth. Too bad, our country was founded on ideals flexible enough to allow us to achieve such a renewal.

10/15/2008 12:15 PM  
Anonymous goldhorder said...


10/15/2008 1:49 PM  
Anonymous Anonymous said...

You draw a nice parallel, but should drop the populist rhetoric of "morality." Last I looked, the folks working at GS/MS/LEH etc. paid more taxes than anyone in the country.

10/15/2008 2:05 PM  
Anonymous Ghidorah said...

Anon @ 2:05:

Oh really? When was the last time you looked?

Last I looked, the tax rate on capital gains and dividends was 15%. So if these people are really paying more than anyone else, they are paying their tax advisors too much.

10/15/2008 2:49 PM  
Anonymous goldhorder said...

hahahahaha...the parasites at the investment banks have payed their capital gains taxes at 15 percent from their stolen loot (at least the ones without off shore accounts). And we should thank them for their great service to the country...hahahahahahahaha...Wow.

The middle classes have always paid the most in taxes. The laws are written by the wealthy to make sure of that. Even during this crisis it will be the middle class who bails wall street out. Wall street has been stabbing the middle class in the back since 1972(End of the gold standard). Inflation, offshoring, globalization, bailout....next up is inflation again. Being first in line at the printing press has its advantages does it not? Damn parasite...you'll get your due yet...this crap ain't gonna go on forever.

10/15/2008 4:58 PM  
Anonymous rapier said...

Until central banks print the money they are dolling out instead of borrowing it deflation will continue. Particularly the deflation of financial assets.

Can someone name one thing in the world that is inflating at this moment?

10/16/2008 7:06 AM  
Anonymous Anonymous said...

My lunch bill for one thing. Price of a salad in mid-town NY deli up 8% last week.

10/16/2008 10:16 AM  
Anonymous goldhorder said...

The credit crunch has certainly been deflationary. Of cousre it would be. That only makes sense. Where is the government and the Fed getting all this money for the bailout? I think the Asians have had enough. That is why Paulson had to go to the taxpayers...to put them on the hook for a trillion. HAHA. Look at all the actions of the Fed. What are they trying to do? They are trying to get credit flowing again...by any means necessary. How are we going to pay for that? Ohhh....yes there has been deflation but I'm talking about the future and you are talking about the present. I'm going to buy gold and silver while it is going down the next year. I will bet my money is well spent by the end of 2012. How did we pay for the guns and butter from the Vietnam war era? Oh yeah...we didn't. We just inflated.

10/16/2008 12:08 PM  
Anonymous Anonymous said...

Can someone name one thing in the world that is inflating at this moment?


Food, especially healthy safe food. Taxes. Home, car, health insurance premiums. Maintenance on home and car - Need a new roof, furnace, hot water heater, tires, mechanical repair. Utilities, telephone, cable, gas, electric, water (drinking and sewage). Land. Funeral and burial services. Drugs for human or animal. Environmental cleanup. Certain labor, accountant, lawyer, veterinarian, electricians, plumbers, doctors.

If you have a job and have your health, and it helps if you are not old or have a defined benefit pension with guaranteed return (much like CEO's and many teachers), things are much better.

On one of the talk programs, they said Wall Street created an artificial and unsustainable economic level. But, underneath that artificial layer, there are real needs and wants. We just have to tell Wall Street to move aside so we can get to work.

10/16/2008 1:54 PM  
Anonymous Anonymous said...

The Right's hatred of Jimmy Carter, just confirms how wrong and dangerous the right is.

10/16/2008 1:55 PM  
Anonymous Anonymous said...

Can someone name one thing in the world that is inflating at this moment?

Anything you need to live is and will inflate rapidly, like food. Anything you want, like plasma TVs, will deflate rapidly.

10/16/2008 4:41 PM  
Anonymous goldhorder said...

If the government was wise it would allow the banks to fail, cut spending, raise interest rates, and end the good times for the military industrial complex. This would be deflationary and we would experience a severe recession. Americans would be forced to pinch pennies and save...and times would be very tough but the dollar would not be ruined and in time our financial system could recover. We have experienced inflation for the last 8 years...the last few months we have seen deflation...we probably will continue to see this for the near term future because of the credit crisis. Every action by the government is inflationary. They are buying shares in the banks...which will give them more control over banks...which will get credit flowing again...When credit starts flowing again...that is when we will see the inflation. And it is going to be ugly 70s style inflation. The Chinese and Arabs have quit recycling dollars back to us and we will try to get out of this with the printing press.

10/17/2008 12:21 PM  
Anonymous Anonymous said...

Harry Dent writes about the effects of demographics. Many like William Bernstein, have been predicting a down market, low return, from about 2010 to 2020, give or take several years.

There is never a good time for a financial crisis, but it seems this one could not have come at a WORSE time. With low retirement savings, the attack on Social Security, and our debt, do you envision a massive retirement bailout next? If we bailout out Wall Street, shouldn't we bailout Main Street?

They say American saving rate is low, but at the same time they say Americans have to spend to keep the economy going. Which is it?

Sure would be nice if our financial institutions were more responsible and trustworthy.

10/20/2008 4:27 PM  
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