The Gift That (We) Keep(s) on Giving: Through January 2013

“Demand a property tax on idle wealth.  Demand it NOW.” —Liam McGonagle

“Seriously, do you expect a better opportunity to extract concessions from your enemies than when they lay begging, bleeding at your feet?” Liam McGonagle

In case you were in the washroom when ‘Jersey Shore’ was interrupted with this late-breaking newstory:  Ben Bernancke just committed the U.S. to provide the European Central Bank (“ECB”) with an unlimited line of credit.

That’s right, a brand new bailout.  Structurally along the lines that Business Insider had warned us about in September, but much more ambitious; that article had postulated a trifling $1 trillion, not the bottomless pit we’re actually being presented with.

The basic deal is that we hand dollars over to the ECB in exchange for Euros, the value of which, has become highly dubious to say the least. The ECB will in turn invest those dollars in large corporate banks to bolster balance sheets they themselves ruined through reckless underwriting practices and constant pressures for tax holidays and austerity measures.

MarioDraghi
Boun Natale e felice anni nouvi, Mario!

This is being billed as a stopgap measure to compensate for the fact that the genius architects of the Eurozone couldn’t be bothered to implement a fiscal coordination authority in their new currency. Must have seemed reasonable at the time.  We’d seen the end of history, after all.  Just like American civil liberties after 9/11, all the rules had changed.  The new era of seamlessly integrated global markets had pushed the capitalism’s cycle of inevitable liquidity crises into the dustbin of history, right?

But is it really stopgap? While similarly available currency swap loans had been available for some time previous, the duration of the current arrangement (i.e., a 50% reduction in the interest rate) is through January 2013, and is unlimited in amount. Meaning that the commitment is bounded in no way by the current supply of U.S. dollars.  So, at least theoretically, the U.S. will end up printing the dollars it will be obligated to provide incompetent European bankers.

When the implications of this development had finally settled in, and I’d had a chance to change into a clean pair of trousers and shower up a bit, I settled to thinking. Two paradoxically conflicting corollaries floated to the surface:

1.  Nobody, I mean NOBODY, seems to have learned the lesson of the previous bailout regimes or Quantitative Easing programmes, namely that the size of the money supply in-and-of-itself is of distant, secondary importance to the circulation of currency.  Or, to put it in layman’s language: BANKERS DON’T DRIVE THE ECONOMY, CONSUMERS DO.

2.  The bizarre occurrence of one nation printing money to manage the fiscal problems of another demonstrates exactly the sort of international commitment and cooperation that would be necessary to curb the irresponsible corporate leeching that led to these problems in the first place.  You know what I’m talking about, that old mantra of the defeatist traitor:  “But if we try to regulate corporations effectively, they’ll just pull of stakes and move the show overseas!”

As this incident suggests, it is effective government that provides the necessary stability for corporations to exist. If so-called “populist” Tea Baggers in the House had the brains to realize this, they’d take this opportunity to make corporate elites pay their fair share of the burden:  i.e., more historically reasonable income tax rates and a tax on idle wealth. Seriously, do you expect a better opportunity to extract concessions from your enemies than when they lay begging, bleeding at your feet?

Sadly, neither of these realizations seems likely to amount to much. This is the era of greasy hacks like Newt Gingrich are seen as “transformational leaders” [1] and the worthless empty suit Obama tries to slide turds like this past us whilst simultaneously telling the American people that their “moment is NOW“. To date, the most vigorous response I’ve seen on this issue has been Ron Paul, condemning the Fed for taking this action unilaterally.

Which, quite frankly, whilst being a step in the right direction, is nowhere good enough. Paul was asleep at the wheel on this issue in September, wasting our time with penny-ante Solyndra b*llsh*t. And nowhere do I see him calling for greater international government cooperation to curb the unaccountable multinational banks who are the primary beneficiaries of these abuses.  No mention anywhere of any increased corporate oversight, or fair transaction or property tax on the parasitic financial sector that destroys 80 cents in GDP out of every $1 that we give them.  Overall, even after grading on a curve, I just can’t give Paul any grade higher than a “D-”.  Try harder.

Footnote
[1] Newt’s constant use of the word “transformational” is equal parts insult, comedy and tragedy. There’s one reason that dried up old carpet-bagging whore never got “born again” into the Evangelical movement he so lustily courts on the campaign trail:  He’d leave a toxic oil slick in the baptismal pool.  The only thing Gingrish ever transformed is my dinner into vomit.

Another heaping helping of Hades, from Dystopia Diaries

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  • http://buzzcoastin.posterous.com BuzzCoastin

    Ben Bernancke just committed the U.S. to provide the European Central Bank (”ECB”) with an unlimited line of credit.

    Was there anyone who didn’t see this coming?
    It happened in 08 as well.

    What never seems to be discussed is
    that the bailout money came from nowhere.
    It simply appeared in a computer system
    and the word became money and dwelt among us.

    Now that we know money grows in computer systems
    and is not scarce or even hard to get
    you would think we would use this magic ability
    to create wealth for everyone and not just a small elite.

    Everyone is busy try to put Humpty back together again
    when its really time to begin something new.
    It should be obvious to everyone at this point
    that business as usual is leading to a disastrous end.

  • BuzzCoastin

    Ben Bernancke just committed the U.S. to provide the European Central Bank (”ECB”) with an unlimited line of credit.

    Was there anyone who didn’t see this coming?
    It happened in 08 as well.

    What never seems to be discussed is
    that the bailout money came from nowhere.
    It simply appeared in a computer system
    and the word became money and dwelt among us.

    Now that we know money grows in computer systems
    and is not scarce or even hard to get
    you would think we would use this magic ability
    to create wealth for everyone and not just a small elite.

    Everyone is busy trying to put Humpty back together again
    when it’s really time to begin something new.
    It should be obvious to everyone at this point
    that business as usual is leading to a disastrous end.

    • Jygolfer80

      Its just gonna take one major instance of a foreign company/country to not accept US Dollars to repay a debt.  Its bound to happen if this cycle continues.

    • J Ackley

      The realization that money can be created virtually out of nothing should not, I think, be an indication that wealth can be created for the entire population. Instead, it should show that our monetary system is entirely disconnected from natural processes. If money can simply be fabricated with almost no restriction, it does not actually represent material wealth. Real wealth is measured by resources and services, not the value of an arbitrarily scaled system. It is true that we could create wealth for everyone, and I  mean that literally, but it would not be through the use of money, which is used as debt exchange for artificially scarce resources. True wealth can be brought forth only through the intelligent application of technology to manage the worlds resources. 

  • Jygolfer80

    Its just gonna take one major instance of a foreign company/country to not accept US Dollars to repay a debt.  Its bound to happen if this cycle continues.

  • J Ackley

    The realization that money can be created virtually out of nothing should not, I think, be an indication that wealth can be created for the entire population. Instead, it should show that our monetary system is entirely disconnected from natural processes. If money can simply be fabricated with almost no restriction, it does not actually represent material wealth. Real wealth is measured by resources and services, not the value of an arbitrarily scaled system. It is true that we could create wealth for everyone, and I  mean that literally, but it would not be through the use of money, which is used as debt exchange for artificially scarce resources. True wealth can be brought forth only through the intelligent application of technology to manage the worlds resources. 

  • 5by5

    This would be why Dennis Kucinich’s legislation should get passed. He wants to bring the Federal Reserve under the control and jurisdiction of the U.S. Treasury (which constitutionally is SUPPOSED to be the only entity controlling the issuance of our currency).
    http://www.rawstory.com/rs/2011/12/01/kucinich-bill-seeks-to-end-the-federal-reserve/http://www.youtube.com/watch?v=X1dkZShYP78___________________“The National Emergency Employment Defense (NEED) Act of 2011 would place the Federal Reserve, a private, qusai-governmental institution that controls the nation’s monetary policy, under control of the U.S. Treasury. It would also implement new rules for the financial industry, in hopes of ending the worst abuses that created the 2008 financial collapse and the ensuing recession.

    “Ten million homes are in jeopardy,” he explained in a recent plea for support published to YouTube. “Fourteen million people out of work. Fifty million without health care. Endless wars. The Fed creates money out of nothing, gives it to banks, banks keep it on deposit, gain interest, pay high bonuses — fat city — while the rest of America falls apart. The Fed creates money out of nothing for the banks. Meanwhile, the rest of us have to be stuck in a debt-based economic system? I don’t think so.”“Now do you understand ‘Occupy Wall Street’?” he asked.

  • 5by5

    This would be why Dennis Kucinich’s legislation should get passed. He wants to bring the Federal Reserve under the control and jurisdiction of the U.S. Treasury (which constitutionally is SUPPOSED to be the only entity controlling the issuance of our currency).
    http://www.rawstory.com/rs/2011/12/01/kucinich-bill-seeks-to-end-the-federal-reserve/http://www.youtube.com/watch?v=X1dkZShYP78___________________“The National Emergency Employment Defense (NEED) Act of 2011 would place the Federal Reserve, a private, qusai-governmental institution that controls the nation’s monetary policy, under control of the U.S. Treasury. It would also implement new rules for the financial industry, in hopes of ending the worst abuses that created the 2008 financial collapse and the ensuing recession.

    “Ten million homes are in jeopardy,” he explained in a recent plea for support published to YouTube. “Fourteen million people out of work. Fifty million without health care. Endless wars. The Fed creates money out of nothing, gives it to banks, banks keep it on deposit, gain interest, pay high bonuses — fat city — while the rest of America falls apart. The Fed creates money out of nothing for the banks. Meanwhile, the rest of us have to be stuck in a debt-based economic system? I don’t think so.”“Now do you understand ‘Occupy Wall Street’?” he asked.

  • 5by5

    That was interesting – when I posted, the links got screwed up. Let’s try that again:

    http://www.youtube.com/watch?v=X1dkZShYP78http://www.rawstory.com/rs/2011/12/01/kucinich-bill-seeks-to-end-the-federal-reserve/

  • 5by5

    Apparently, it can’t handle two links in a single post. Here’s the other one:

    http://www.rawstory.com/rs/2011/12/01/kucinich-bill-seeks-to-end-the-federal-reserve/

  • sonicbphuct

    While I’m annoyed with the financial antics – one thing concerns me the most: Competition for a World Reserve Currency. The Euro and The Dollar have been in direct competition since about 2001 (coincidentally when someone drove two planes into buildings in New York). At no point in the last 10 years have I ever heard anyone discuss what competition does to Currencies. More specifically, what it does to a currency the world had “psychologically” accepted.

    With the US pumping dollars into the Euro zone, it seems to me that the US is attempting to solidify it’s hold on the “Reserve” status is has had up to now. When one considers that the total GDP of the 50 US States (and it’s colonies, er, ahem, territories) is somewhere around $14 trillion, and the total for the “EuroZone” – the 26+ states (i haven’t kept up on membership roles) is around $16 trillion, the “Reserve” concept begins to deteriorate.

    So, the real question for me is: What happens if the US loses it’s “Reserve Currency” status for the world? Further, why would someone (American or Other) be interested in destabilizing the “Reserve”? What benefits are there to being the “Reserve Currency”?

    Anybody got any good answers? I definitely do not – well, not any worth your time, I’m sure.

  • Anonymous

    While I’m annoyed with the financial antics – one thing concerns me the most: Competition for a World Reserve Currency. The Euro and The Dollar have been in direct competition since about 2001 (coincidentally when someone drove two planes into buildings in New York). At no point in the last 10 years have I ever heard anyone discuss what competition does to Currencies. More specifically, what it does to a currency the world had “psychologically” accepted.

    With the US pumping dollars into the Euro zone, it seems to me that the US is attempting to solidify it’s hold on the “Reserve” status is has had up to now. When one considers that the total GDP of the 50 US States (and it’s colonies, er, ahem, territories) is somewhere around $14 trillion, and the total for the “EuroZone” – the 26+ states (i haven’t kept up on membership roles) is around $16 trillion, the “Reserve” concept begins to deteriorate.

    So, the real question for me is: What happens if the US loses it’s “Reserve Currency” status for the world? Further, why would someone (American or Other) be interested in destabilizing the “Reserve”? What benefits are there to being the “Reserve Currency”?

    Anybody got any good answers? I definitely do not – well, not any worth your time, I’m sure.

  • Rmdouglas27

    Solution, end the Fed.  Know your history, a central bank was not what the Founders wanted.

  • Rmdouglas27

    Solution, end the Fed.  Know your history, a central bank was not what the Founders wanted.

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