Did the big speculators who lost recoup by scaring the public?
Was the 'Credit Crunch' a Myth Used to Sell a Trillion-Dollar Scam?
| The Bush Administration lied before; they claimed: thousands of al-Qaida sleeper cells in America to sell the Patriot Act, WMDs to pass the Iraq war resolution, and a Social Security system teetering on bankruptcy to push for privatizing Americans' retirement savings. That push did not go thru but their subsequent bailout for Wall Street did. We trim and append this 2008 op-ed posted on AlterNet, Dec 29. |
by Joshua Holland, staff writer
The $700 billion bailout for bankers and brokers was given with little oversight and has given back even less effect on the financial meltdown. Was it sold to Congress and the public based on another Big Lie?Some banks, undoubtedly anticipating more write-offs from loans going bad, are hanging on to their capital now rather than make new loans. And, some of the lenders that are relatively healthy are holding cash in anticipation of picking up weaker banks on the cheap. However …
The National Federal of Independent Business' November survey of small-business owners found no evidence of a credit crunch to date, concluding that if "credit is going untapped, it's largely because company operators are not choosing to pursue the credit. It's not that companies can't get the extra money, it's that they don't want or need it because of the broader slowdown in economic activity."
If creditworthy applicants for home loans were being denied by banks unable or unwilling to lend, Dean Baker argues that "the ratio of mortgage applications to home sales should be soaring" as qualified homebuyers apply to multiple banks for a loan. "Since there is no notable increase in this ratio, access to credit is obviously not an issue." Even though mortgage rates have plummeted, the number of applications for new loans has dropped to very low levels.
Economists at the Federal Reserve Bank of Minnesota's research department -- V.V. Chari and Patrick Kehoe of the University of Minnesota, and Northwestern University's Lawrence Christiano -- crunched the Fed's numbers and concluded that :
- "interbank lending is healthy" and
"bank credit has not declined during the financial crisis"; that they've seen "no evidence that the financial crisis has affected lending to non-financial businesses" and that
"while commercial paper issued by financial institutions has declined, commercial paper issued by non-financial institutions is essentially unchanged during the financial crisis."
The researchers called on lawmakers to "articulate the precise nature of the market failure they see, [and] to present hard evidence that differentiates their view of the data from other views."
That finding was backed up by a study issued by Celent Financial Services, a consulting firm, using the Treasury Department's own data. According to a story on the report by Reuters, Celent's researchers concluded that the "data actually suggest world credit markets are functioning remarkably well." Rather than a widespread banking problem, Celent found that the rot was limited to "a few big, vocal banks and industries such as car manufacturing, which would be in difficulty anyway."
While losses at the top spurred the ruling elite to yet again drain the public treasury, the economic crisis remains a product of long-term imbalances in the economy. The idea that the recession is primarily a pathology of the banking system, when actually it spilled over from the metro land bubble, is a misdiagnosis. Following a prognosis based on it can only result in a longer, deeper, and more painful recession than might otherwise be the case.
If lending to qualified parties has truly frozen, then "recapitalizing" banks in various ways, buying up some of their crappy paper and guaranteeing some of their transactions -- is fundamentally sound. If, on the other hand, the primary problem is that people are broke and maxed out on debt, and firms aren't looking for money to expand, then pump-priming designed to stimulate demand from the bottom up, with public works projects, tax cuts for working families, makes more sense.
JJS: Even more sensible is to quit basing our material security on relentless economic growth. Economies should serve people, not the other way around. Fundamentally, people don’t need jobs (nor a lot of the “goods”, such as breakable plastic toys, and the “services”, such as frivolous law suits).
What people do need are truly useful goods -- like heat in the winter -- and services -- such as good doctoring -- and, of course, the money to buy them. To increase income, government can play a role. One, politicians can quit taxing wages. And two, they can recover the values of land and resources and direct a portion of those funds into a dividend to the citizenry.
Public recovery of natural rents will end the speculation and resultant recessions. Meanwhile, the dividend will cushion people during an economy’s natural slow times. This shift of taxes and spending is called geonomics and has worked wherever tried.
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Jeffery J. Smith runs the Forum on Geonomics.
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Also see: Public dollars are already lining speculator pockets on Wall Street
The house price crash starts in 2008
The rich seek shelter while the wise predict a collapse |
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