But, on the very face of it, doesn’t that mean that our economy is creating more and more debt? If well over half of the “domestic product” consists of money being spent on consumer goods, then less than half of the economy consists of money being earned by producing goods, and that means we have a negative economy, one that is creating debt.
No one disputes that either, and no one seems to be concerned by it. One reads statements constantly to the effect that “our economy is fueled by credit,” and that “our economy depends on the availability of credit.” Indeed, credit has been readily available, at low interest rates which were set not by demand, but by government fiat, and which was secured not by real collateral, but by the “bubble” value of a glut of real estate.
Indeed, the current failure of our economy is attributed to a failure of available credit.
So an economy based on consumer spending and easy credit has failed in a very major way, and what are we doing to recover? We are lowering interest rates, trying to stimulate consumer spending, and trying to restart easy credit by pumping more cash into financial (lending) institutions. Trying to restore the economy to the condition that it was in when it failed.
What? Isn’t that rather like trying to get a car with a blown engine going again by refilling the gas tank with high octane?
“My engine done blowed up!”
“Okay, pull up to the pumps and I’ll gas you up.”
So far, this tale just sounds stupid, but then it takes a turn toward ugly.
To date some $125 Billion has been injected into the failing institutions in the name of “recapitalization,” with more promised up to a supposed maximum of $700 Billion. The idea, supposedly, is that the money will be loaned to people and that will stimulate the economy. But…
According to USA Today, fully half of the banks which have signed up for the recovery program are intending to pay out billions of dollars in dividends to their stockholders. Too cash-short to lend money, but they have money to pay dividends to stockholders. Money they received from the recovery program? It would seem so. And there’s more…
According to The Nation, the shares that were purchased with this money are identical to shares purchased a month ago by Warren Buffet except in three respects; the taxpayer shares have no control, they pay half as much return on the investment, and they cost twice as much per share. Click on the link and read more. And there’s more yet…
According to Bloomberg News, firms that have received funds from the recovery program are intending to pay year-end bonus money to their executives in very large amounts. Totals are not known, but just three of those firms have set aside $20 Billion for that purpose. Again, click on the link and read the full details.
Barack Obama has promised to make sure than none of these things will happen, but he needs to be in office to do that and, assuming he is elected, he will not be there until Jan 20, 2009. All of these atrocities are happening now, with cooperation of officials of the Bush Administration.
This administration has almost three more months to facilitate stealing from the Unites States taxpayers by its cronies. In its rush to maximize its looting of the Federal Treasury, it is no longer even attempting stealth or pretense, and there seems to be absolutely nothing we can do to stop them.
Update: Sunday, 7:20pm
And now the Washington Post is suggesting that the $143 Billion the US taxpayer has pumped into AIG may not have done anything useful for the US taxpayer. Putting that money into a bankrupt company may have been a bad decision.
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