I think it is a noble thing indeed to rescue the home-owning people and so save America from errrr itself(?!?). But which home-owning people? Are two-home-owning people more deserving of a life-buoy than than one who owns but as single home? "Who" are we we saving "them" from? Faceless foreclosure? The bank? Chinese mortgage-backed paper-holders? Our pension funds who own mortgage-backed paper? Are the folk who bought stupid interest-only low-teaser-rate mortgages more deserving than the ones who simply paid too much and find themselves in negative equity? Should we save those that patriotically took out home equity loans following 9-11 in order to spend as they saw their patriotic duty? Or should we "save" those who continually withdrew equity from their homes to cruise the world or buy a plasma TV, such that, like Icarus, they simple consumed too close to the sun?!? What about the people, who deserved the good life, and in whose pursuit deservingly stretched to buy an extra 2000sq ft with pool, 3-car garage, and gallery ceilings, leaving no wiggle room for the inevitable "shit" that all-too-often happens in the course of life. Perhaps, the US gov't can recoup costs by having a 24-7 reality TV show that combined CourtTV with "Judge Judy" and "How to be a Millionaire " in a macabre publicized real-life drama showing precisely "how" they got there, and throwing themselves on teh mercy of the errr court/government/panel have you to see if they qualify for a "subsidized mortgage", "elimination of some principal off the loan", "temporary interest rate relief"," stay of execution in respect of foreclosure, or for the lucky few (and truly deserving) few, outright annulment of the mortgage loan, and award of the contested home free and clear.
But I will ask the question: Are not the savers deserving too? Perhaps the savers should unite and ask the government to provide them with some redemption for the lax fiscal policy and negative real interest rates that have spawned inflation in the real basket of goods and services one uses and consumes each day. It IS perverse justice that the prudent one's who save for a rainy day, and consider wisely, the possibility that something might upset the best laid of plans, and so do NOT borrow 6-times their income on absurd luxury that the less wise did, and who as a result were so stretched they could not afford to landscape in the first instance, nor now they can afford the energy to heat or cool the royal waste of space. Where is culpability or responsibility?
That there has been a large transfer of wealth from savers and the equally-weighted American to military contractors, leveraged asset-buyers and their intermediaries is undeniable. Perhaps, in similar fairness we should create a look-back tax that assesses the gains (some or many ill-gotten) made from the asset inflation and money illusion and redistributes it the ordinary savers and pensioners? We can call it the Sowood Tax in sympathy with Mr Larson's magnanimous gesture of returning previously-earned performance fees to investors following his Fund's recent debacle. America is not for wont of wealth, but is for wont of more disperse distribution of it. When however the distribution is sooo skewed, taxing the average to save the average citizen seem reasonably daft, given the enormous tax holidays and munificent gifts adorned upon the upper-most percentiles. Perhaps the time has come for more meaningful sacrifices that begins to tackle what almost every objective observer sees as a way of life that depends upon unsustainable consumption, encouraged by absent levies upon the many externalities this life spawns. The bubble, is perhaps in the American Way itself. And everyone sees it, but Americans themselves.
Rant over.
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8 comments:
It seems there is just this huge irrational fear to let the damn market clear.....and it's not a fear that resides amongst level headed, cash heavy bears. No, that fear is on the other side of the isle. Alan, Ben, Paulson and all the magicians they champion act like the only alternative to continous inflation is a reply of '29, so it's really not a choice to them.
It's the damndest thing, all those who scream "Resliance" don't really belive at all, but rather keep printing and intervening away to "save" the structure. Problem is, the harder they try, the more real fat tail risk they create.
I for one believe that there are many who would be standing around to help it clear and turn things around, but sadly I have to endure the tag of Calvin, and debate whether or not to join the asylum.
RJ
Allow me to add:
Finance any and all of the above mentioned operations with taxes on:
1).Subprime lenders whose business plans gave as much thought to durability as the designers of the Ford Pinto. (This now ex-post).
2). The cathode ray tube (and all subsequent forms of backlit display) and it's attendant destruction of the human attention span, not to mention peripheral vision.
3). Possibly the entire baby boom generation for its, so far successful, insistence that bad shit could somehow be effectively dealt with through the assigning of responsibility for it (Cargo cult meets Sigmund Freud).
Regards
RJ - Thanks. I was afraid that a brief missive on the more practical consideration of throwing a lifebuoy to the over-extended threatened to turn into a "runaway rant". I, of course, agree with your sentiments, in all respects. But "the bubble" runs deep, to the very core of American folks' sensibilities. The sad thing is: it it could be turned around with small effort, not egregious dislocation, and very little practical impact upon people's lives in modernity contrary the threats of going back to a "caveman" or "16th agrarian existence". This is same pathetic shite that scuppered universal healthcare during CLinton-I.
The market will do it to America eventually, and the whole process would be more orderly andmanageable with more sensible choice under the guidance of structured energy policy, consumption taxes, and more progressive sharing of the burden of moving a chaotic society more sanely into the 21st. "Rights and responsibilities" should be the emergant motto, NOT "Me Me Me bugger the cost to everyone else.."
Thakns for this beautiful post and your comment, Cassandra.
My poor english doesn´t allow my enjoying your technolecto, an irony, but go on.
Kudos to your blog!
Nice post Cassandra and anonymous. The world is changing and no one wants to except it especially those who currently reside at the top of the current political and economic structures. The global economy is heading towards a fifty year fat tail.
I'm ready with guns, cans of spam, and bathtubs filled with rainwater. Now can we get some more "When I was a young quant" stories with Deliverance-style background banjo music ...
-pi
"Wont" or "want"? That changes the meaning of the sentence considerably.
But really the root of the problem is structural. So long as capital is regarded and treated as the only "factor of production", to which profits, i.e. productive surpluses and their distributions, accrue, such that decisions solely concerned with its maximalization determine the disposition not just of the other factors as mere "resources" and the consequent distribution of social "wealth", but the possibilities of technical development, and so long as that is regarded as the exclusive organizing principle of political societies, then any "resolution" to a financial crisis is just a recurrence to the same. That might be hard to construe from the perspective of the financial system, in terms of which it is only the continuity of payments that is at issue, but it is the crux of the issue in terms of the "real" productive economy, from which the "value" of financial "assets" must ultimately derive. The expansion of the economy on the basis of ever greater accumulations of debt, as if profits could be simply minted in advance out of profits, the ever more intensive financialization of the productive economy, amounts to a doubling down in the short term on an inevitably unknowable, hence "riskless" future. And if the real world does not return the favor, is it the rest of the world that is to pay? Moralizing at times of financial crisis will hardly do, as if it were merely the best of intentions that have gone awry, or as if finally the wheat will be sorted from the chaff.
It seems to me that the underlying imbalances/power relations between the interests or capital, those of states and those of working populations and natural communities underlie the ever-growing excrescence of finanacial "assets", which ever so imperfectly transmit the balance of risks and uncertainties, never mind their inequities. The problem is not exclusive to the U.S.A. China's Gini coefficient is at least as bad. It's only that U.S. $ hegemony has permitted the debasement of the currency/externalization of costs in this particular epoch, (er, including those costs born by the American working class, ye old "silent majority"). Unless new ways are found to gather and transmit information and balance and regulate interests and constraints, reviving the financial system is just kicking the can further down that long, lonesome road. I'm not interested in separating out sinners from saints: it's a matter of altering, if not lessening, the burden of temptation.
Excellent post and superb comments. Thank you for talking about the herd of elephants in the room, it’s refreshing.
JS
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