Oct 13 2008

Goldman Sachs Socialism

2.4 trillion dollars up in smoke since the Democratic Party/Bush bailout of Wall Street, just the beginning of a global systemic financial meltdown?

October 13, 2008 – 3 min 54 sec

Pepe Escobar: World markets and top economists dismiss the Wall Street bailout

World markets on the verge of panic continue to dismiss the Bush/Paulson Wall Street bailout plan – despite White House rhetoric and supposedly concerted action by the G-7, the group of leading industrialized economies. Top economists criticize the mechanics of the plan, which concentrates too much power on Secretary Paulson and his Goldman Sachs colleagues; warn of an incoming systemic crisis; and point out the taboo topics nobody is talking about: the US budget deficit and the US military budget.

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    • Edger on October 13, 2008 at 21:10
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  2. …the stubborn, slow refusal to take real action.  In his column today in the NYT, Paul Krugman, our new Nobel Laureate in Economics, praises Gordon Brown for implementing the correct policy and leading Europe to do the same.  Below is the essence of Brown’s plan and the usual reaction by U.S. mucky-muckers as Krugman states in his oped:

    What can be done to stem the crisis? Aid to homeowners, though desirable, can’t prevent large losses on bad loans, and in any case will take effect too slowly to help in the current panic. The natural thing to do, then – and the solution adopted in many previous financial crises – is to deal with the problem of inadequate financial capital by having governments provide financial institutions with more capital in return for a share of ownership.

    This sort of temporary part-nationalization, which is often referred to as an “equity injection,” is the crisis solution advocated by many economists – and sources told The Times that it was also the solution privately favored by Ben Bernanke, the Federal Reserve chairman.

    But when Henry Paulson, the U.S. Treasury secretary, announced his plan for a $700 billion financial bailout, he rejected this obvious path, saying, “That’s what you do when you have failure.”

    Golly!  Gee!  I wonder what he means by failure?

  3. Karl Denninger on his blog today, 10/13/08, says

    Last night Trichet and other policymakers in Europe basically forced Bernanke’s hand, initiating 100% guarantees of interbank lending.

    This forced Bernanke to follow suit early this morning, lest the US markets and US credit system implode into a smoking hole instantly.

    This was not a position Bernanke was willing to take on his own, or he would have.  But when the rest of the world has done it, you literally have no choice, unless you intend to be turned into an instantaneous credit island – an event that the United States would literally not survive.

    So the die was cast and Paulson and Bernanke’s refusal to endorse this step in the G7 meeting Friday was literally rammed down their throat.

    Now, however, we have a new problem.

    Denninger goes on to talk about how further defaults will then accrue to the guarantors.  

  4. That nice man in the video doesn’t understand the need for defense spending in this great country of ours.  Here in Alaska we’re on the front lines guardin’ against Putin and his sneaky Russian invaders.  The “Hockey Mom Brigade” is doin’ their best to hold him back, but we need more of your tax dollars to keep America safe!  

    Get well soon, Edgar!  Also.    

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