Truth, lies and ticker tape By Spengler
If American banks are permitted to fail, and their operations maintained intact by the FDIC, new investors can restart operations with a clean slate.
What is so awful about wiping out the home price bubble of the past 10 years? Suppose home prices were to plunge by half (which is where homes in foreclosure clear the market in California or Florida)? Young people would find it easier to start families and old people would work longer before retiring.
Nonetheless, the bailout package will pass in some form. America's intellectual class, right, left and indifferent, is too dependent on the begging-bowl proferred to the financier class to conceive of its existence after the prospective demise of its patrons. Republican congressmen whose constituents fervently oppose the bailout quake in terror at the prospect of absorbing blame for a new depression. If the depression comes despite the bailout, of course, they will have even more explaining to do, but that is a different story.
Ultimately, it is the Americans who lack the guts to oppose it. As I argued on September 23, they are like gamblers who pass a tax to bail out the town casino, after unpaid gambling debts threaten to sink it. Americans will not easily give up the illusion that ever-expanding wealth is their birthright.
As I reported on September 29, America's wealth was about three times family income in 1962, and over 10 times family income in 2004 (see US wealth in shrink mode). Leverage applied to housing created an illusion of wealth on top of a stagnant base of income. Take away the banks, and the wealth illusion will die forever. Americans will actually have to save, rather than speculate in the property market.
The bailout will pass in some form. But the next time you see a talking head on television telling you that the bailout is imperfect, but that it is the only choice, remember: it just ain't so.
What is so awful about wiping out the home price bubble of the past 10 years? Suppose home prices were to plunge by half (which is where homes in foreclosure clear the market in California or Florida)? Young people would find it easier to start families and old people would work longer before retiring.
Nonetheless, the bailout package will pass in some form. America's intellectual class, right, left and indifferent, is too dependent on the begging-bowl proferred to the financier class to conceive of its existence after the prospective demise of its patrons. Republican congressmen whose constituents fervently oppose the bailout quake in terror at the prospect of absorbing blame for a new depression. If the depression comes despite the bailout, of course, they will have even more explaining to do, but that is a different story.
Ultimately, it is the Americans who lack the guts to oppose it. As I argued on September 23, they are like gamblers who pass a tax to bail out the town casino, after unpaid gambling debts threaten to sink it. Americans will not easily give up the illusion that ever-expanding wealth is their birthright.
As I reported on September 29, America's wealth was about three times family income in 1962, and over 10 times family income in 2004 (see US wealth in shrink mode). Leverage applied to housing created an illusion of wealth on top of a stagnant base of income. Take away the banks, and the wealth illusion will die forever. Americans will actually have to save, rather than speculate in the property market.
The bailout will pass in some form. But the next time you see a talking head on television telling you that the bailout is imperfect, but that it is the only choice, remember: it just ain't so.
posted by temporal at 10/03/2008
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