Tuesday, February 3, 2009

The Shape of Things to Come -- Part 3

Before discussing what I believe will ultimately take place, I want to offer an alternative that ought to be considered, despite the fact that there is little likelihood of its being implemented:

Let the system fail. Not just the banks but the entire financial system, the whole shebang. Just leave it be and let it fall of its own weight. Ironically, many of the most extreme neo-conservative Republicans have also taken this position, but for all the wrong reasons. I won't waste time discussing their take on the present crisis because they are clearly in a state of shock characterized by totally irrational denial. There is no course of action or inaction that could be taken at this point that could possibly advance the neo-conservative agenda. Their day is done!

Once the system has been allowed to totally and completely fail, not because of any action on the part of the government or any other entity, but simply as a result of the inherent limitations built into any Ponzi scheme, there will be an enormous destruction of something called "wealth." Not only will the investment banks we are now trying so desperately to save lose essentially all their value, along with all the tranched up bonds and other "toxic assets" no one understands how to value anymore (because they are essentially worthless), but the "market" (i.e., Wall St.), venerated for so long as the ultimate object of worship in the economic pantheon, will also dissolve, essentially, into nothing, diving, in all likelihood from a Dow now hovering around 8000 all the way back down to 1000 or below -- ideally down to nothing at all. Goose egg! (My old algebra teacher's nickname for the number zero.)

Funny thing about this thing called "wealth." After all that devastation, you'll look around you in every direction and not notice one single thing of any real importance that's any different from the way it was before. Well, maybe just one little thing. The Wicked Witch will be dead. The evil Kastchei will be destroyed. Lord Voldemort will be defeated. Darth Vader will be crushed. The vast wealth of the likes of Richard Fuld, John Thain, Donald Trump, a host of oil sheiks, Russian oligarchs, "geniuses" of high finance and "Masters of the Universe" will be reduced to a piddling few millions, hardly enough to fuel their private jets.

But (gasp) won't that also be a disaster for all us "little people" out there, the ones depending on the health of "the market" to preserve our precious 401 (k)s and other assorted retirement investments? Isn't the financial well being of "Main Street" dependent on the well being of "Wall Street"? Interesting question.

Think of it this way. If Donald Trump owed you $10,000 and was faced with imminent bankruptcy would you expect the US congress to bail him out with a gift of, say, $100 million so you could get your money back? Or would you be satisfied with an arrangement by which Trump's creditors would have to be paid back first, before he went bankrupt?

Let the system fail. Do not invest that trillion dollars in an attempt to shore up the wealth of all those billionaires just so some small fraction of it might trickle down to the rest of us -- an effort that will ultimately prove futile in any case. Let the whole thing crash totally and completely into nothing.

Next, nationalize all those banks. Take over all those foreclosed homes -- and put their former mortgage holders back into them (see my earlier post, "Just a Thought"). While you're at it, nationalize every failing business, and get people working again on their old jobs. Then take that trillion and spend it on infrastructure, well paying jobs, a meaningful social safety net, expanding Social Security, implementing universal health care, providing adequate clothing, food, prescription drugs, etc., drastically lowering the cost of higher education, etc. With an adequate safety net in place for the retired, the losses on all those 401 (k)s won't matter anymore. "Main St." will be in excellent shape. And Wall St. (the wicked witch of the East) will be dead.

A complete restructuring of not only the economy but government itself, along more or less socialist lines, would of course be necessary. On a worldwide basis, because the whole world is in this together. Every failing bank, every failing business should be (inter)nationalized. An international council modeled on the S. African Truth and Reconciliation Council should be convened, in order to forgive all debts and systematically redistribute all wealth worldwide on the basis of need, ability and willingness to work. Not too long ago such an idea might have seemed hopelessly Utopian. Now it just seems like the most practical (and possibly the only practical) recourse.

The above proposition makes a great deal of sense to me. But, for obvious reasons, there is no way anything like such a scenario could actually play itself out, given the current political climate, not only in the USA, but the world at large. In my opinion we are nevertheless headed in more or less the same direction. But via a more circuitous -- and no doubt far more painful -- route. Which will be the topic of my next post in this series. Stay tuned . . .

No comments:

Post a Comment

 
Add to Technorati Favorites