Two Points

I turned the tube on an hour or so ago, and tuned to CNN—it’s been a while so I decided to see what there talking about and how they talk about it. I forgot that Life With Louie (Lou Dobbs) was running around this time, otherwise I would’ve been deterred from turning the television on, but I sat on the couch before I heard his pompous little invectives of the Wall St. bailout, so I just decided to wait for the picture to turn on and watch it. I sat there listening to this guy, staring at his capped teeth and his well powdered cheeks, becoming a bit queasy from the contrast between his hair’s orange sheen and the waving American flags on the background display screens, and sat there listening to him berate the “greedy Wall St. guys” and the proposed $700 billion dollar bailout. It’s quite interesting how TV journalists ostensibly go so far in criticizing the establishment. Well, at some point soon there later, I heard him point two interesting things about the current financial affairs, the latter actually being a proposition. The first point was essentially, you know, “just let them (Wall St.) fall, let them fail, they deserve it.” Sensible. Okay the second point was what he calls trickle up economics (a cognate of the Trickle Down economics, where if I make billions of dollars, you can work for me and job employment grows), where he asks, “Why not inject money into the subprime consumers and therefore save Wall St. and the taxpayers, Henry Paulson speaks so fondly about? Why not bailout those who defaulted on their subprime loans and avoid completely the mess we’re in?”

The first few seconds, I thought about it earnestly, because in market economics it’s f!*cking inconceivable. Nonetheless, I entertained the thought. And it occurred to me: you can criticize the establishment . . . because the American people are still utterly stupid, like Pavlovian dogs grouped in a bewildered herd (I’m saying this from the educated elite’s perspective). I doubt Mr. Harvard Lou himself believes what he reads off the teleprompter, but it goes to show you what sort of republic we’re in.

In regards to the “consumer bailout”: If the government bails out the consumers or borrowers, however you prefer to call it, the government has just given an extraordinary amount of money to a very large population of consumers; their money supply has increased drastically. Now, there’s a difference between consumers and industries. Here’s one part of the difference: if you give free money away (it’s similar to the, “why not give everyone a million dollars?”) a violent inflation will ensue like Krakatau. The money amount proportionate (and most likely even more skewed) to the government’s injection amount will essentially become worthless; and it’s a great amount of money injected because the subprime mess measures in the billions. This in turns flips upside down our sense of economic reality, our economic perception of what is and what isn’t. Just try to think of the mammoth implications that would require in such a codified economic system we have to do. Every relationship within that system will have its cherry popped again, and again, and again. The Fed will lose their monetary policy—the exact thing they are to prevent is this chaos. Marginal propensity to Consume (MPC, the % of each additional $ income that we spend on consumption) would go haywire distorting all sorts of models and formulas. Foreign investors and economies would look into their wallets in confusion and say WTF?! and look around at each other and say I have a brain freezzzzeeeeeee! Remember: money (paper notes) relies on it’s relative scarcity, it’s legal tender, and it’s acceptability. These three things give money value, status, means of permutational exchange. If the government bailed out the consumer, the government and consumer (citizen) are now conflated. The transaction would see two parties: business and government. You can’t do that. That’s chaos. The government is money—all the treasury has to do is call Fort Knox and say print the money. This relationship defies economics. Now, if we’re more cautious and just presume a brief governmental intervention, then what is concluded from thereon is that the government’s word is worth nothing, it’s responsibilities are left to Judah. You can’t have legal framework, wherein private property and business operate, underpinned by such blasphemy as the government’s violation of economic “laws”. (I feel like emailing an economics professor to make sure I’m right, because Louie’s proposition is just ludicrous.)

Why not let Wall St. fail? Simply put: because it would be the beginning of the end for capitalism. And notice, unlike the preceding presentiment of a “consumer bailout”, a Wall St. bailout is possible and functional because government’s role is to ensure the function of society. The Social Compact, right? The government provides a legal framework for business to operate. You can bailout business because business is a social enterprise within that framework (you can't bailout the citizen from its own social framework). And it can do so because the government is vested authority by the people. Hobbes, Locke, Montesquieu, Rousseau, right? They worked out their theories and a republic is formed. Well, from the 18th Century onwards, two forces have kneecapped the notion of government as the authority; that’s why we now distrust the government, right? Those two forces are technology and modern business. The concept of power has attained greater freedom with the rise of those two forces, but with it the excesses from those two forces has given the people—the powerless—the opportunity to learn what is freedom (which is different from that of power’s.) Wall St. must be bailed out because that would mean power (what the government holds traditionally and what business holds privately) is shifted back to the old concept of government and closer to the people, where then people have to operate with their own resolve, not leaving things up to the powerful.



Anyway, you can catch Louie every weeknight at 7 pm eastern. You can learn alot!