Sunday, October 05, 2008

Smoot-Hawley again?

The bailout for bankers and speculators - to be taken of course from the hides of Americans who do real work - has passed Congress. It says something about our times that its passage is flagrantly unconstitutional, since revenue measures must originate in the House of Representatives and this one was first passed in the Senate. Who cares about the Constitution, which is in the words of constitutional scholar George Bush "just a goddamned piece of paper?"

The economic details and their consequences are very well explained here in Asia Times, and also here in Money Morning. Plenty of economists have warned against this folly, just as they warned against the Smoot-Hawley Tariff in 1929, which Congress passed and Hoover signed in 1930, helping to turn the rough times of 1930 into a whole new thing in 1931 and 1932.

From a simple theological standpoint, the problem is this, as almost all average Americans understand, and which only the best and the brightest don't get:

It robs the poor in order to give to the rich - for which the Bible promises you will come to poverty - and what's even worse, it punishes the innocent in order to reward theft. This paper being foisted on the taxpayers has become crap because the underlying assets - mostly houses so far - have lost their value and can't be sold. Since nothing is being done to keep people from being thrown out of them, they're going to keep losing value, because one foreclosure promptly drops the price of all other houses around. People who are getting thrown out of their houses, or fearing that they will be, don't buy things, so businesses who can't sell anything will fire their workers, who in turn will fail to make their payments and will get thrown out of their homes.

Robbing these people so that rich thieves can keep their millions does nothing to stop this downward spiral. What would have worked is to protect the homeowners involved by forbidding foreclosures, seizing and liquidating irresponsible institutions and using their assets to defend common people from financial ruin. Such people would be much more likely to buy things, and that would actually help the real economy, even though there might be a crash in the yacht market.

It should be obvious that this bailout, which even if it were sound in principle is grossly underfunded for its stated purpose, is a calamity. By further wrecking the real economy, it will do to us as the Smoot-Hawley Tariff did in 1930. This turd got through the House of Representatives because Barack Obama pressed the Democrats hard to vote for it. He deserves to become President to reap the storm whose seeds he sowed last week.

Here's why ridiculous mortgages were written in the first place. The people lending the money knew it didn't matter whether they'd get paid back, because they'd have the loan sold and out of their lives in less than a month. The kickback to us who got these at the time was being able to get mortgages we weren't qualified for at lower rates than made any sense in view of the risk that somebody somewhere was going to eat, so we all liked it at the time. It was easy to overlook the really grand thefts of our lenders, because, as the proverb says, "A bribe blinds the heart."

"He that covers his sins shall not prosper, but he who confesses and forsakes them will find mercy." This is a good time for all of us to consider our ways, because if not, those ways will bite us some more in the coming days as we continue in them.

To lend money recklessly because you don't have to worry about getting paid, passing the risk off on someone else by lying about it, is simply theft. To make the taxpayers buy that crap is to do more of that same theft that made the problem happen in the first place. Banks and speculators around the world stuck with this trash because they aren't qualified to be bailed out can now sell it to those that are, who will then cash it in at Uncle Sam's Bank of Sugar Daddies and Suckers, draining even more money from the real economy. Massive government borrowing to finance this nonsense will dry up credit for all other entities, thus actually worsening the credit crunch in the end.

The scripture is true: "He who robs the poor, and he who gives to the rich, both alike will come to poverty."


Anonymous Suzy said...

I agree with your assessment of the bailout plan but do think your comment, "This turd got through the House of Representatives because Barack Obama pressed the Democrats hard to vote for it" is unfair and possibly misleading. Here's what McCain had to say recently in New Mexico about Obama's participation: “Even after he refused to lift a finger to prevent this crisis, when the crisis hit, he was missing in action. He didn’t even start making calls to round up votes until after the rescue bill failed in the House and the markets crashed. We continue to see the price of delay today as the markets continue to fall. Today, the Dow has fallen below 10,000, and yet members of his own party said they felt no pressure to vote for the bill. Why didn’t Senator Obama work to pass this bill from the start? Why did he let it fail and drag out this crisis for a full week before doing a thing to help pass it?” Now, don't get me wrong--McCain's saying anything these days to make his rival look bad, and he's not fair or accurate here either; but this bill would have passed whether Obama had given his support or not, especially after the newer version was larded with a lot of extra goodies for certain recalcitrant reps (google "bailout bill pork" for Reid's story in UK Times et al.). And as for your further comment that "[Obama] deserves to become President to reap the storm whose seeds he sowed last week"--well, the seeds from which this mess has developed have been growing and thriving for some time in America, I think you'd agree. Whoever's elected is certainly going to inherit a shitstorm, no question. It's harsh to conclude that Obama--or McCain--personally "deserves" what the next president's job will entail. Yes, by the act of being in the race they're 'asking for it,' but talking about Obama as if he'd spearheaded this bill isn't helpful. I'm tempted myself to consider all the voters who elected Bush not once, but twice, and think, "you've reaped what you've sowed, you fools!"--but again, what real comfort is that? They're fellow citizens, repellent as I find many of their attitudes and arguments. Obama's not perfect (he wouldn't be where he is if he were), but he's still the better choice in this contest. McCain doesn't seem like a bad guy (though I think the race has not brought out the best in him)--but Palin alarms me. She is talking and acting like someone who feels anointed, without any doubts, "full of passionate intensity," as Yeats put it. An ambitious person, who just wants to win this one as though it were the beauty contest she won before. And chances really are pretty good that if the McCain/Palin ticket prevails, she'd end up president. Thank you for the Kilkenny thing, too. I find your blog edifying.

10/08/2008 9:44 AM  
Blogger Peter Attwood said...

Well, I didn't suggest that Obama spearheaded this bill. He stood aside at first, wanting to be well away from it, and shrewdly so. But once it failed on the first go, he jumped in to get Democratic congressmen to vote for it, although it is a calamity which will only make everything worse, as he must know.

He could have stopped this and made them put the help where it should go, instead of increasing income inequality and assuring us that the coming collapse will be even more severe than it would have been.

If Obama had stood against it, and in favor of something to help real people, many Democrats would have voted no that voted yes, and many Republicans, to save their jobs, would have had to vote no as well, instead of being able to vote yes under the cover Obama gave them.

So right now Obama made everything worse by supporting this thing right before the election, and not being stupid, he must know what he was doing.

We'll certainly get a bad deal in November no matter who is elected. Obama may turn out not to be as bad as McCain and Palin, who are more likely than Obama to put me in a detention camp as things unravel in the next 4 years. But I'm still pretty sore about his wittingly acted to make everything even worse, when he undoubtedly would have won the election anyway if he had done the right thing in this case.

10/08/2008 6:33 PM  

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