My Honest View of the Economic Crisis: A Very Dangerous Game

[Mike 03]

This is just my opinion, but I'm being as honest as I can be, and I hope that my words make sense.

There never was anything that a single person or branch of government could do to "solve" the financial crisis other than miraculously convince the entire world that a solution was in place that could work. You think Bernanke can save us? Or Geithner? Or Hercules?

This is a confidence game. It's no coincidence that Bernanke, Geithner, Paulson, Kashkari and so many others, including the Inspector General of the OCC, heads of the FDIC, OTS, SEC and now even the FBI keep using that word, "confidence," when they attempt to make sense of the economic crisis.

But this is beginning to feel a lot like the climax of the Wizard of OZ. The curtain has been pushed aside by both friend and foe; well-meaning smart people and repukes who want nothing more than to see Obama fail.

We have tried or are in the process of attempting to try:

Recapitalization
Stimulation
Absorption of Toxic Assets

Very few people seem to have any confidence that this is enough. Economists don't believe this will work. Investment advisers don't believe this will work. Money managers, accountants, ex-Treasury, Rating Agencies, Hedge Fund operators, and people of all kinds here at DU don't believe this can work.

Well, you are probably right.

The "game" was this attempt to create confidence. But so many people are not playing along that the ploy is falling flat on its face.

If people believe, they spend.
If people believe, they consume.
If people believe, they borrow.
If people believe, they invest.

But the facts are more complicated:

There are trillions upon trillions of illusory financial products out there that are completely unsecuritized. It's hard to make a case that this can be remedied by recapitalization, stimulation or even widespread purchase of toxic balance sheets. It's not just the United States; it's the UK, it's Western Europe, it's Eastern Europe, it's Asia, and it's the developing world. It's Mexico, it is Iceland, it is the Ukraine and it is Dubai.

(If we were to make a parable of this, AIG would stand for "America, India, Germany", which would give some sense of how many nations are infected.)

This notion that Ben Bernanke or Tim Geithner can wave a magic wand and make this go away is poisonous nonsense.

I am sure most of you have figured this out by now, but there are still some people who don't get it.

That's my two cents.

[kurt_cagle]

1. Confidence Game

To a certain extent you're right. What you have in place right now is what amounts to a huge fraud that's been perpetrated on the part of a number of financial institutions that's been found out. The problem is that the fraud is huge, and so pervasive, that if you actually marked to market all of the assets that are really there, tens of TRILLIONS of dollars would evaporate because they don't really exist - they are essentially promises that have been made all up and down the line that were never intended to be honored.

So instead, the only real option left is to "pretend real hard" that the money in the electronic ledgers has just gone on walkabout for a bit, and if we wait long enough, it'll come back. Note how many financial companies are now giving back TARP funds, because the execs at these companies KNOW that they're sitting on great edifices of hooey and that if they have to give back their parachute funds then there's no reason to stick around - there's no way that they're going to solve the problem otherwise.

[tbyg52]

2. It's not that I think they, or anybody, can wave a magic wand

I just am, and have been since the beginning, perturbed by the foxes-guarding-the-henhouse aspect, or at least appearance, of the economic appointments.

[bob4460]

3. GET RID of CAFTA NAFTA all that shit

fuck globalization and I will believe once again

[terisan]

4. Yet there is an economy that always operates and seldom uses bank loans & I wonder if

it is possible that it will prove to win out and even prosper.

The super-corporate economy has some real negatives--people are often underemployed-have to stifle creativity and additionally in our country-have remained in position they hate or which are unsuitable to their skills and talents because they are really working for health insurance.

I believe it is urgent to provide health insurance to everyone and to de-couple it from employment. This really needed to be our first task because it can unleash a tremendous amount of locked up initiative and talent.

So many people I know would be working in the arts or working on inventions, for example, if they were not afraid of being without coverage. They don't necessarily need great incomes but they need the level of security people used to have when they could afford to pay for basic healthcare out of their own pockets.

[Mike 03]

5. Self Kick, because I think I have a relevant point and care what others think. NT

[buckshotdad1960]

6. The deadly wound

Some think this is the beginning to the deadly wound talked about in the bible. This wound is to a politcal system that rules the world.