Tuesday, September 23, 2008

Sarah "Peggy" Palin-Hill

Here's a little article I've drawn up in my free time between edits at work.

I've been editing a ton of these Bloomberg interviews with economists. They range from all the way to the right to all the way to the left. It's been pretty eye opening in the last few weeks. Anyway, I've gone ahead and wrote this to sort of sum up my feelings so far, I've included a few quotes from some of the interviews to bolster a few of my arguments too. Some of these people are pretty smart I think.

In case you've been living under a rock, the government has been bailing out specific loan institutions on Wall Street recently in order to free up liquidity in the market and try and make loan money available to people (businesses) that should be able to get it.

There are several things that are really scary about these bailouts. First and most obvious, it's billions of taxpayer's dollars that are being used by the government to buy up these institutions. What's happening is that as the Government buys up these things like Fanny and Freddie, they aren't putting their debt on the books. If they were to do that, and accept it as part of the process, U.S. debt would double over night just by the purchasing of those two institutions.

"The fact that politicians don't want to put that on the book and face up to the taxpayer and the voter to tell them what they've really done speaks volumes."

I agree that some of these bailouts are necessary. But the government has been choosing which companies to bail out based on how much money is at risk, not by whether or not they actually need/deserve the help. It's sending the message that Capitalism is here to allow people to make money by any means necessary, but that when you fail, or get beat, the government will be there to save you from disaster.

There's this economics term, "Moral Hazard." Sure, there's morality in even the most cutthroat laissez faire Capitalism. It's all in how you look at it. The companies that were using deceit and trickery in their loan processes should have to pay. Bankruptcy is a natural part of the process of the reallocation of capital into newer and fresher parts of the market. Bankruptcy is necessary. As long as we continue to bail out companys based on how much money is at risk, we aren't going to solve the problem and if anything, we're just going to make things worse.

"The best response is to add liquidity to the market to make sure that the loans can still be made, that transactions can still occur, and then companies with bad balance sheets are not going to survive. Companies which have an underlying health, and healthy balance sheets should be assisted over time, not over night."

Now that the government has been pouring all this money into saving the failing loan institutions on Wall Street, failing companies in other sectors have begun to ask for handouts as well. General Motors, for instance, is asking for $25 billion in government loans. They were originally asking for $50 billion, but they've wised up and lowered it.

GM has made poor decisions in the auto market. They find themselves backed up against the wall, as do other companies in Detroit. And they're looking desperately for some sort of federal handout. But the fact is, there's no real market failure in play here. Others in the auto industry are flourishing and there's no reason why a company that made the wrong decisions, who is now against the ropes so to speak, should be given a shot of adreneline (or steroids) to fight back against the companies that have legitimately planned and trained for the fight.

"In a capitalist market, you have to allow for failure. You have to allow for companies to go bankrupt. You have to allow for the engines of creative destruction to reallocate resources and assets among different order classes."

And if it means that these companies go under, then so be it. But we cannot have a capitalist system where it's okay to make money but if you lose money, somebody else is going to pick up the tab. Or if you ever need a helping hand, you go running to the taxpayer. Now I might be missing the point here, but this looks like social welfare for big business to me. Now THAT'S irony.

Another great example is the Nuclear Power industry. John McCain, who was arguing against these sorts of government loan guarantees in the primaries is now for them. He's flip flopped because of the actions of other people in his party and because it's such a tight election.

John McCain is talking about having the Federal Government build 45 new nuclear power plants by 2030. Now, the nuclear power industry says no power plant is going to get built unless the Federal Government underwrites every last penny of the loans necessary to build the $6 billion power plant.

If you do the math on that, 45 plants times $6 billion is what the Federal Government and the taxpayer would be on the hook for to guarantee the loans to these nuclear power plants. That's just stunning. It makes what GM's looking for look like chump change.

And amid all this, the Republicans feel it's okay to use Sarah Palin, yeah I had to go there, to avert people's attention from the real issues.

Sarah Palin has become a champion of the Conservative movement. Why? Did she outline what was wrong with the country's agenda, what was wrong with the country and how she proposed to fix it? No, she offered a class warfare schoolyard taunt and a bunch of cute (frightening) sound bytes.

We're moving back into a world where the Republican party stands for nothing except class resentment, cloth coat Republicanism, and the anger at elites who are supposedly out to take their red churches and Bibles and puppy dogs.

Remember when both Gore/Kerry based their campaigns around how bad George Bush would be/was? Remember how that didn't work and it angered a lot of Democrats to the point where they actually voted for third parties because they were so disgusted with the spinelessness of the Democratic Party?

Now it's the Republicans who are using the scare tactics to try and prevent people from voting for Obama.

In a world where information and ideas are traded more freely than ever, where people are finally given the freedom to self publish things, like this article for instance, which anyone anywhere can read, Palin and McCain are actually attacking Obama for using too many big words.

In a world where education is the true building block on which the future of our nation and our world stands, they want you to vote against someone for sounding too intelligent.

John McCain warned us from the beginning that this election wasn't going to be about the issues, but none of us expected it would be like this.

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