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Thursday, April 02, 2009
Treasury hopes to get us out of the mess by replicating the flawed system that the private sector used to bring the world crashing down, with a proposal marked by overleveraging in the public sector, excessive complexity, poor incentives and a lack of transparency.
What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other. And such partnerships — with the private sector in control — have perverse incentives, worse even than the ones that got us into the mess.
Joseph E. Stiglitz
The whole Geithner plan stinks. It is even more of the same, socialising the losses and provatising the profits and Stiglitz is not the first to point out that this plan is just a way of robbing the taxpayer to get the nasty stuff off the banks' books without looking like pure nationalisation of the debt to the man on the street.
It is disgusting!
The fact that 90% of the population aren't rioting in the street suggests that the US public are bovinely cowed and stupid...or is it that a large portion of them believe that, given their obscene debts, this will work out well for them? Whatever the case the whole thing fills me with loathing of the whole system...there is absolutely no morality left. I see no reason to be honest and hard working anymore...none. I've more or less come to the conclusion that tax evasion is a moral duty. Boy are my kids going to get a different lesson about how to behave in society than what I did from my parents.
The only way to get these toxic assets off the banks' balance sheets in a fair way that does unduly encumber the taxpayer, is by allowing the banks to fail. Certainly there would be a certain cascade effect, but being "too big to fail" is absurd, and creates moral hazard - if a bank only borrowed and lent enough, it would put the taxpayer at its mercy by being "systemic". But the hopeless flailing around with obfuscation schemes designed to transfer the "systemic" risk to the taxpayer, is no less systemic once it sits uncomfortably on the public balance sheet, and given the globalisation in the finance industry and the politicisation of these decisions, are simply protectionist.
The Banks must be allowed to fail. The losses must be accepted by equity holders and bond holders. The fools must be parted from their money. It will hurt. It might even be seen as depressionary. But it will be over much sooner, the market will find its bottom, the point from which it can recover. However, a finance industry absolved of its utter failure, transferred to an overburdened and newly indebted taxpayer, is a recipe for a much longer and intractable depression.
Yesterday's demonstration in London is really just the tip of the iceberg.. The *ankers waving money from the windows is like the french gentry's behaviour just before the revolution.
This is the start.. Just wait until later this month when Brown ups the tax to extortionate new levels and by the end of the year, we are all watching our food and fuel skyrocket, and interest rates get hiked .. We are nearly at breaking point.. I think the majority of the population are in denial at the moment, but that will soon turn to anger and we WILL have civil unrest.
History does have a habit of repeating itself. Mark my words, please somebody.. quote me in 12 months time.!!
sketched by dweller at 10:14 am
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