Wall Street vs Main Street

Currently, writing anything about the economy is one of those things that goes out of date as soon as it is written. I won't count how many times I have rewritten this and doubtless could again the moment it gets published.

Having a degree in economics, which I most certainly do not, might not have helped, as some of the best economic minds have not been sure what to do. The one thing many are starting to agree on is let's look carefully at this bail-out proposal. Giving the foxes more money to guard the chickens is not likely to help. [Dirty Secret of the Bail-out]

When McCain said our economy was fundamentally sound and then revised it to say our workers were, he was ignoring the connection between banking, loans and jobs. Here's one article about what was happening and could have happened: Almost Armageddon.

A lot has been thrown at us at once. They (many theys) tell us that our economy was on the point of collapse but we can bail it out with a trillion dollar loan gift with no guarantees, no promise that this all won't happen again, or that it really solves the problem. Somebody made bad loans and now want the taxpayer to absorb those loans while letting somebody keep all their profits. Bad loan = yours. Good loans = ours! And the fix has to be enacted immediately or our economic structure will collapse like a house of cards (which it kind of was).

If you haven't already read Naomi Klein's 2007 book, Shock Doctrine the rise of disaster capitalism, head down to your bookstore or library and take a look. Create a disaster, an emergency and then offer a solution that they wanted but couldn't get without the shock. Make it an emergency and you get what you wanted.

Americans have been duped into such rapid movements that ended up giving away even their precious freedoms, duped into wars that have worsened our financial situation, and this is no time to be railroaded again-- but Congress looks ready to do it anyway.

I am not suggesting we can ignore the seriousness of this situation. How many of us know enough to even understand what it is-- except for one thing. When I grew up and became an adult, there was such a thing as pensions. Someone would work many years for a company and be guaranteed a pension based on their salary and length of service.

Today very few people, who didn't work for government, have pensions. Main Street depends on Wall Street and investments to fund retirements. Social Security, despite the resentment the right feels toward it, offers only an emergency cushion for most people.

If you think a collapse of Wall Street wouldn't matter to you, because your money is in a box under your bed, think of the jobs of your neighbor, your food, trucking, the whole ball of wax. You might not be depending on loans or investments, but a lot of everything around you is. Check out this in-depth analysis for what has been going on while we were sleeping.

Ariana Huffington wrote this for a simplified explanation for what she believes led to this point: "Phil Gramm, then chairman of the Senate banking committee, did the heavy lifting, and John McCain was an ardent supporter of the deregulation, but Rubin and the Clintonites were certainly up to their eyeballs in pushing legislation gutting so many of the regulations designed to bring accountability to our complex free market system. These bills included the the Financial Modernization Act, which obliterated Glass-Steagall; and the Commodity Futures Modernization act, which gave us unregulated trading of derivatives and the kind of credit default swaps that threaten our economy -- both signed into law by Bill Clinton."

Obviously plenty of blame to go around! At a rally in Las Vegas on Wednesday, before the bail-out proposal, Barack Obama said, "We can't steer ourselves out of this crisis if we're heading in the same disastrous direction. We can't steer ourselves out of this crisis using the same old map, we can't steer ourselves out of the crisis if the new driver is getting directions from the old driver, and that's what this election is all about."

In his latest speech, Obama proposed: remarks on the economic bail-out and our economic situation. Did he got far enough with recognizing Americans have some blame in this too? Is good judgment something that has to be legislated?

Paul Krugman said when the government stepped in we were only days away from a total crash of the stock market, led by money market funds, ending in another great depression like we had in 1931. The situation was dire, is dire, but the question of exactly what we will gain for the taxpayer bailout it less certain. Many, who do understand this, are saying go slow now. Talking Points-- put on the Brakes.

One thing that seems clear to me is you don't want those who got us into this mess to profit from this bail out. Bush disagrees with this and thinks we should not penalize those who led us to this point. Not hard to figure out why he'd think that way.

Robert Reich, who has an excellent blog on this, [What Wall Street should be Required to do to get a Blank Check], said we should also immediately block the lending and insurance groups, that are looking for a fix, from lobbying. They are like wolves scenting prey nearby. They created the mess and now want to tell us how to fix it? hmmmmmm does that smell bad to you?

The problem with any of these guarantees, like the one at your bank for insuring $100,000, is that guarantee is dependent on the federal government's solvency. Feeling good yet? The whole banking and loan system is based on trust between the people, business and government. What happens when fundamental trust is broken?

This is what Greesnpan said: This is the worst economy I have ever seen. Greenspan is not a young guy and doesn't he have some responsibility in what happened?!

Here is another helpful link from someone not in the US but looking at a breakdown that is impacting more than us: For Wall Street, Greed wasn't enough by Paul Wilmott

Often, Republicans run and win on two arguments-- tax cuts and an unfettered business economy. Let capitalism work and it will flourish for us all. Except, we don't have a pure capitalism system. Have we ever? And if it's so great, how come we have to bail it out with tax money?

Sarah Palin and John McCain talk a lot about reform. I am not sure she has a clue what that would really mean (get rid of earmarks which she has been scooping up as mayor and governor?).

After what he said last week, I doubt John McCain understands it either. His best friend financial adviser is still Phil Gramm. McCain's campaign manager, Rick Davis, was paid $30,000 a month for five years by Fannie Mae and Freddie Mac [to do what exactly?] Then there is the new McCain ad accusing Obama of having connections to a Fannie Mae insider except [he doesn't] and McCain does. Amazing,isn't it!

If any of this reassures you, you aren't paying attention yet.

During Bill Clinton's eight years as president, for all but two years, it was a Republican controlled Congress. We now have had 8 years of a Republican presidency-- four of them with a total control of both Congresses by the Republicans and the rest with enough Republicans to sustain any vetoes if they so wished.

At the end of Clinton's tenure, there was talk of a recession. I am not sure if that loosening of regulations was intended to circumvent that. I would guess sub-prime mortgages, where you let someone get a home loan with nothing down, that was supposed to make our economy look more robust even if it wasn't. Some blame the poor now for taking those loans. Doesn't whoever gave them bear some responsibility? Was someone making money off this until the bubble burst?

Homes were bought which buyers often couldn't really afford but counted on home values constantly going up. Worse, other homeowners financed their consumer debt by equity loans dependent on the value of their property rising. The bubble was a lot of what made the Bush economy look like it had real growth (that and buying war supplies, which we also couldn't afford and had to borrow to fund).

This is another good article on what has happened and what we need to understand. It also adds to why you don't want a bad reputation in your neighborhood if you someday need favors: The Fleecing of America by Roger Cohen. It might give some second thoughts in those who thought it was enough to have a president who is a fun person at a barbecue or a beauty queen.

If we have been irresponsible, the federal government has been more so. Instead of paying down our debt, which was $10.6 trillion but jumped to a potential of $11.3 if all the debt we just assumed ended up being bad debt (it won't), the government just keeps adding to it.

Try this little film: I.O.U.S.A

The pelicans were dining on their Main Street when I was at the beach Saturday. I have never gotten closer to them. Whatever was coming in on the tide was definitely more appealing than my presence was upsetting.

The beach was full of birds which was encouraging to me as last year about this time, it wasn't. This was a healthier looking coastline. Some say the currents have shifted and at least for now that has made it good on Oregon's coast for birds and people.