28 Sep 2008

No bailout is big enough to solve the credit crunch

Portraying the credit crunch as a strange anomaly that can be cured by writing a trillion-dollar cheque is extremely naïve and unrealistic.

The United States and its citizens are carrying an unprecedented and unsustainable debt load. Thanks to the neocon regime of the past twenty-eight years (yes, you too, Mr. "3rd Way") which hobbled the government, and the klepto-corporatist administration still in office (and up for a third term) which raided the wealth of the nation to hand over to oil and military contractors (and now financial firms), the United States is so far overextended that the entire world is collectively cutting it off from further credit.

Danger! Cliff!Just as banks are suddenly thinking, "hey waitasecond, maybe we shouldn't hand out credit cards like party favours", and "maybe we should check to see whether the collateral on a loan actually exists", investors and central banks of other nations are suddenly thinking, "hmmm, the United States has a seemingly infinite trade deficit and doesn't seem to produce anything of value but porn", "I wonder what, if anything, backs T-bills these days", and finally "It doesn't seem that the US military is going to be pushing anybody else around anytime soon."

The bailout is supposed to remove toxic mortgages from the balance sheets of large financial firms, and that is supposed to magically cause the credit to flow again. Wrong. What happened with the subprime loan mess is that it eventually woke everybody up to the fact that the US is at the end of its empire, and extending it credit no longer makes any sense. The US and its citizens can't afford any more debt, and they aren't going to be allowed any more. The party's over, the keg is all tapped out, and this hangover is going to be long and difficult, with vomiting, nausea, and no more drinks for a long, long time.

Bush waves goodbyeThere's not enough money in the collective assets of the United States at this point to buy a hair-of-the-dog large enough to make a difference. The US has declining human capital in every measurable way, it has a tarnished reputation, and the valuable raw natural resources now lie chiefly in other countries. This bailout is just a parting shot, a payoff to the powers who bought and paid for this administration, and a fond final farewell snatch from the taxpayers who made the whole show possible.

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