me:
> there's this big mix-up among economists, in which any statism (and
> intervention in markets) is considered to be "socialism."
from N. Roubini:
Nouriel Roubini | Sep 9, 2008
The now inevitable nationalization of Fannie and Freddie is the most
radical regime change in global economic and financial affairs in
decades. For the last twenty years after the collapse of the USSR, the
fall of the Iron Curtain and the economic reforms in China and other
emerging market economies the world economy has moved away from state
ownership of the economy and towards privatization of previously
stated owned enterprises. This trend was aggressively supported the
United States that preached right and left the benefits of free
markets and free private enterprise.
Today instead the US has performed the greatest nationalization in the
history of humanity. By nationalizing Fannie and Freddie the US has
increased its public assets by almost $6 trillion and has increased
its public debt/liabilities by another $6 trillion. The US has also
turned itself into the largest government-owned hedge fund in the
world: by injecting a likely $200 billion of capital into Fannie and
Freddie and taking on almost $6 trillion of liabilities of such GSEs
the US has also undertaken the biggest and most levered LBO
("leveraged buy-out") in human history that has a debt to equity ratio
of 30 ($6,000 billion of debt against $200 billion of equity).
So now Comrades Bush, Paulson and Bernanke (as originally nicknamed by
Willem Buiter) have now turned the USA into the USSRA (the United
Socialist State Republic of America). Socialism is indeed alive and
well in America; but this is socialism for the rich, the well
connected and Wall Street. A socialism where profits are privatized
and losses are socialized with the US tax-payer being charged the bill
of $300 billion.
This biggest bailout and nationalization in human history comes from
the most fanatically and ideologically zealot free-market
laissez-faire administration in US history. These are the folks who
for years spewed the rhetoric of free markets and cutting down
government intervention in economic affairs. But they were so
fanatically ideological about free markets that they did not realize
that financial and other markets without proper rules, supervision and
regulation are like a jungle where greed – untempered by fear of loss
or of punishment – leads to credit bubbles and asset bubbles and
manias and eventual bust and panics.
The ideologue "regulators" who literally held a chain saw at a public
event to smash "unnecessary regulations" are now communists
nationalizing private firms and socializing their losses: the bailout
of the Bear Stearns creditors, the bailout of Fannie and Freddie, the
use of the Fed balance sheet (hundreds of billions of safe US
Treasuries swapped for junk toxic illiquid private securities), the
use of the other GSEs (the Federal Home Loan Bank system) to provide
hundreds of billions of dollars of "liquidity" to distressed, illiquid
and insolvent mortgage lenders, the use of the SEC to manipulate the
stock market (restrictions on short sales), the use of the US Treasury
to manipulate the mortgage market (Treasury will now for the first
time outright buy agency MBS to manipulate and prop up this market),
the creation of a whole host of new bailout facilities (TAF, TSLF,
PDCF) to prop and rescue banks and, for the first time since the Great
Depression,to bail out non-bank financial institutions, and a whole
range of other executive and legislative actions (including the recent
bill to provide a public guarantee to mortgage for banks willing to
reduce their face value).
This is the biggest and most socialist government intervention in
economic affairs since the formation of the Soviet Union and Communist
China. So foreign investors are now welcome to the USSRA (the United
Socialist State Republic of America) where they can earn fat spreads
relative to Treasuries on agency debt and never face any credit risks
(not even the subordinated debt holders who made a fortune yesterday
as those claims were also made whole).
Like scores of evangelists and hypocrites and moralists who spew and
praise family values and pretend to be holier than thou and are then
regularly caught cheating or cross dressing or found to be perverts
these Bush hypocrites who spewed for years the glory of unfettered
wild west laissez faire jungle capitalism (and never believed in any
sensible and appropriate regulation and supervision of financial
markets) allowed the biggest debt bubble ever to fester without any
control, have caused the biggest financial crisis since the Great
Depression and are now forced to perform the biggest government
intervention and nationalizations in the recent history of humanity,
all for the benefit of the rich and the well connected. So Comrades
Bush and Paulson and Bernanke will rightly pass to the history books
as a troika of Bolsheviks who turned the USA into the USSRA. Fanatic
zealots of any religion are always pests that cause havoc and
destruction with their inflexible fanaticism; but they usually don't
run the biggest economy in the world. But these laissez faire
voodoo-economics zealots in charge of the USA have now caused the
biggest financial crisis since the Great Depression and the nastiest
economic crisis in decades. So let them be shamed in public for their
hypocrisy and zealotry that has caused so much financial and economic
damage.
--
Jim Devine / "Nobody told me there'd be days like these / Strange days
indeed -- most peculiar, mama." -- JL.
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