midtowng's blog

Wall Street Bailout: Trickle-Down Economics on Steroids

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trickle-down theory: the economic-political argument that the increases in the earnings of the rich are good for the poor because some of those additional earnings will benefit the middle class and the poor through increased spending, investment, and job creation.

You remember the trickle-down theory that is forever associated with Reagan, don't you? It was only about 18 months ago that the NY Times declared trickle-down theory to be discredited and unable to work in the real world. The article was a devastating indictment to the supply-side crowd.

Yet the moment that Wall Street gets into trouble the economists, the media, and the politicians immediately start robbing the poor and giving to the rich.

When $700 Billion is Chump Change

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"Once a run gets started it is rational for other people to join in.”
- Mervyn King, Governor of the Bank of England, commenting on bank runs

Probably about now the people who actually wanted the massive bailout of the Wall Street crooks are asking themselves, "What exactly did we buy with the $700 Billion in taxpayer money?"
It's a little late to ask that question You don't purchase a car without kicking the tires, you don't purchase a home without having the foundation inspected, and you don't bail out Wall Street unless you made certain that the money isn't going to be wasted.

With the DOW dropping nearly 2,300 points in just the 7 days since the bailout was announced, the sheeple are realizing that they've been mugged by the crooks yet again. Except this time the taxpayer wasn't held up. We gave them our wallets willingly.

Progressive Alternatives To The Current Economic System

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When I saw the alternative bailout bill from the so-called "progressive caucus" it struck me as just how intellectually bankrupt the progressive left is. Since when did suspending "fair value accounting standards to financial institutions" be anything other than Enron accounting?
All the great progressives in history rolled over in their graves the day this worthless legislation was proposed. You would never know that the progressive left was founded on Big Economic Ideas after reading this bill.

With this complete lack of direction from the political leadership as an example, I have to wonder if the average progressive is similarly ignorant of all the great ideas that have come before them. So I decided to present just a few Big Ideas from a proud history. None of these ideas are strictly socialist, but all of them have been tried before and worked.

Hair of the Dog: The only thing we have to fear is easy credit

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On March 4, 1933, President-elect Franklin Roosevelt was greeted with grey, cold, overcast skies. The feeling of despair and hopelessness in Washington was so palpable in the air that First Lady-to be Eleanore Roosevelt later said she felt like crying during the Inauguration Parade down Pennsylvania Avenue.
No one realized it at the time, but the Great Depression was at its nadir. That nadir was marked by what was to be the greatest inauguration speech ever given. It was a message of hope, leadership, and fairness, as well as a denunciation of the "money changers" and the need for regulating the financial markets.

But mostly it was a call to do the exact opposite of what Congress chose to do this week.

The Dollar Crosses The Rubicon and Class War

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"An increase in the supply of money will lead to an exactly proportionate increase in the price level. Thus, money supply expansions only cause price inflation."
- John Locke's Quantitative Theory of Money

You just got a lot poorer this month. Did you notice? You will.
The amount that you got poorer can be shown very simply in this graph.

If you wanted to see what the dollar will look like in about 6 months, all you need to do is to take this chart and flip it upside down.

Blowback: Another Failed Bailout Of Wall Street

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Just over a week ago the SEC took an "emergency action" and banned all short selling on 799 financial companies.

Short sellers borrow stock with the aim of selling it, then buy it back at a lower price, hoping to pocket the difference. The commission said short sellers add liquidity to the markets during normal conditions, but recent unbridled short-selling has contributed to the recent tailspin in the stock market.

What the SEC didn't bother to consider was that short-selling also adds liquidity during the tailspin as well.
The SEC has made things worse, not better.

Over $800 Billion already spent bailing out Wall Street

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The current debate seems to be centered around whether to spend $700 Billion taxpayer dollars bailing out the Wall Street crooks that have been stealing from us for decades, or to spend a smaller amount.

No one is asking the question of: Will this bailout do any good?

Here's a point you should all understand: We've already spent more than that bailing out Wall Street this year, and we have nothing to show for it. Why should this latest bailout be any different?

People are Asking the Wrong Question

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All discussion about the proposed taxpayer-funded bailout of Wall Street banks is centered around the idea of, If we don't bail them out, they will fail.
It seems no one is asking a much more important question of, "Will this bailout do any good?" Or to take this one step further, "Will this bailout do more harm than good?"

We badly need to consider what history teaches us before we repeat the same mistakes all over again.

Lessons From Hoover

People like to look back on FDR's New Deal as a success story of government intervention. These people ignore two important facts: a) that Hoover repeatedly tried to save the Wall Street banks in the preceding years and failed, and b) by the time FDR became president almost every bank in America had already failed. There was almost nothing left to save.

What in the Hell just happened?

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It's the usual question that someone asks after getting hit over the head and mugged, or if they were in the immediate vicinity of an explosion.
For the American taxpayer, both of those things happened during these past two weeks.

So many unprecedented events took place in such a short period of time that it was hard to keep up. Lots of people said lots of scary things, but few stopped to break down the most important issues, which are: a) how did we get here, b) what exactly is being done, and c) what does it all mean.

I'm going to try to help with those question.

Congratulations! You now own the mortgage industry!

The End of the American Empire

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Most people think that all you need to maintain an empire is guns, bombs, and soldiers. They are wrong.
To maintain an empire what you need above all else is money. Lots and lots of money. A victorious army in the field is useless without the wealth behind it.

A good example of this is the Suez Crisis of 1956, which marked the end to the British Empire.
America is following in Britain's footsteps.

Britain's attempt to strong-arm Egypt had indirectly caused a nationalist backlash and Gamal Abdul Nasser's rise to power. When Nasser nationalized the Suez Canal, Israel, France, and Britain invaded and quickly routed the Egyptian army.
But they had forgotten to do one thing - clear it with America.

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