Sunday, September 28, 2008
Aren't they quite the collection, yucking it up as if someone just told a very funny joke. Well, the joke's on us. Barney Frank, front and center, is loving every minute of it, basking in all the attention, perhaps unaware of the overwhelmingly negative aspects of the occasion. Ditto for Speaker Nancy Pelosi. Treasury Secretary and erstwhile Wall Street shill, Henry Paulson, looks pleased as punch.
For a solid week, the halls of Congress have been bombarded with phone calls, faxes, and e-mails overwhelmingly and vehemently opposing the bailout as originally presented. Minor add ons and flimsy provisions that will not be adequately enforced, have been inserted in an effort to appear responsive to the public, but as the reports make clear, the core of the bailout as put forth by Paulson remains intact. Most knew the outcome of the week's wrangling was never in doubt, and the price for business as usual now will be much, much steeper. And even as it's clear that trust in the markets has been shattered over these last many months, a precipitous fall in trust in one's government is the next big shoe to drop. The will of the people has been defied on a life and death issue, and when the chickens come home to roost, and they will sooner rather than later, there will be hell to pay.
Amazingly, as reported on Bloomberg, foreign bond holders wanted this agreement so that they wouldn't feel compelled to dump U.S. debt instruments. If so, what a stupid lot they are. The economy is broken, and this deal will not put humpty dumpty back together again. Even if the highways and byways of the credit system are subsequently allowed to clear a bit, I maintain we are now firmly in the realm of pushing on a string. As such, the effect of this bailout will be the same as if there were no bailout, namely a massive slowdown in economic activity. This will cause tax receipts to plummet, which ultimately is exactly what foreign investors should be most fearful of. What's more, as a toxic add on, the currency will, by necessity, be debased as a result of the monetization of the financial instruments of mass destruction. So while the wrecking crew whooping it up in the photo may have bought themselves a brief respite, the coming epic shit storm will not be avoided.