http://market-ticker.denninger.net/
http://globaleconomicanalysis.blogspot.com/

What you hear on the TV news and read in mainstream business or investing news or websites is less than half the truth. The much discussed $700 Billion bailout bill is the most misunderstood issue today, and the other things going on under its smokescreen are far more important in the long run.

This scenario had a preview in the time of the stock market crash in 1929 (October then, also?!), going into the political dynamics of Franklin Roosevelt’s election to his first term as U.S. President in 1932. In ’32, as now, things became very uncertain as to who the next U. S. President would be amidst the depression venue, and in the face of certain non-U.S. financial influences that had demands they sought to impose. But this time, the lag between the the first major “fall over the edge” and the election date is much shorter. Another thing that differs is that the size of the “Market” (and its abuses) is now much larger, and encompasses manipulation of trillions of dollars of mortgage resources (such as in “derivative” trades) and the concurrent manipulation of exchange rates of the once-sovereign currencies of all the world’s major nation-states. These latter types of speculation have been encouraged by the sham called “Globalization” or “World Free Trade”. Such policies were made possible by a world-wide push for Adam Smith-style economics, with the discouragement of government protections of the banks and consumers justified by the assumption that “natural” supply-and-demand dynamics would automatically lead to a stable (however imperfect) system. Few public figures seemed to realize that between WW2 and today, one John Forbes Nash Jr. (Princeton, early 1950′s) actually succeeded in formally disproving and discrediting Adam Smith with Higher Mathematics. With a radically different and far more attractive economic model therefore in the works, there was really never any excuse for putatively learned government agencies (or reputable leaders of partisan political groups, either) to keep selling “free enterprise” to the public in the manner leading to the present general breakdown.

Franklin Roosevelt and those that served with him found that imposing and strengthening certain government protections began to work toward a cure for the evolving breakdown crisis… not that everything they did and said was perfect, or would work exactly the same way today. Some think John Maynard Keynes was the great economist of those times, but the stuff he actually pushed was mostly not applied — Roosevelt TOLERATED Keynes, who, in retrospect, really must have worked for people that had no appreciation for the constitutional governments that were trying to get a start in the new world order (eg, Mexico, Brazil, and the U.S. itself, to name a few).

How would we do it today? We certainly need new treaties among the major nations of the world RIGHT AWAY — and China, India, Russia, and Brazil have already come forward with proposals for an emergency stabilization of international monetary exchange rates, actually inviting the U.S. to go along. That is shame (for the current administration especially), that the U.S. wasn’t much more of a leader in getting on top of this sickness, instead of first becoming such a victim of it, before any “Rooseveltian” remedies were considered. (In the case of exchange-rate treaties, that would be a new “Bretton Woods” agreement.) What we’ve seen so far are pitiful attempts to maintain the trappings of “business as usual”. Now, it looks like the U.S. needs to pitch in and trade a large number of double-, triple-, and quadruple-breasted suits for the proverbial tar and feathers. Certain perpetrators are likely to exposed, and should go behind bars (not the kind where drinks are served, nor those in the elite parlance of lawyers).

All the while, the media (mostly under the control of elitist financial oligarchs) is lying to the general public all over the world — the$700B bailout not only is NOT showing signs of working, but is also only a trial balloon for the real world-wide public swindle that is intended. For the U.S. alone, we are looking at a demand for immediate tribute about seven times greater than Paulson’s bailout. The tack taken by the Treasury should be just opposite: they have loosened up credit for the “big guys” with low interest rates on “Fed” disbursements, allegedly to “stimulate the economy”. They speak of 1-1.5% interest, when the EU demands 5%, imposed on cash flow rates in trillions of dollars per year. Same planet, same system, folks…what does that mean for the U.S. dollar value, not to mention this thing called “general welfare” that the Constitution is supposed to protect? Different kinds of loans should bear appropriate rates, also. The LOW U.S. rate should only apply to INFRASTRUCTURE investments for the U.S. itself, which it needs to put people back to work on repairing, rebuilding, enhancing, and expanding the REAL property and REAL economy of the U.S. (And other nations would be thereby encouraged to do likewise, sometimes in collaboration with the U.S. for special projects.) And the HIGH rate? Any sort of speculators should have to pay (personally) VERY substantial and competetive interest rates to gamble with public funds in ANY country.

In 2007 many State and local government entities in the U.S. signed onto a draft of a “Bankers’ and Homeowners’ Protection Act” (or something like that). At the high levels of the U.S. Federal Government, such voices have seemed to fall on deaf ears so far. But the proposed “pre-bill” has an international following, and is very clear about certain protections and general welfare concerns. One priority would be to freeze all mortgage foreclosures (or even evictions?) immediately, while the government would take as much time as necessary to organize a systematic auditing procedure, and establish appropriate long-term property and financial asset evaluations with fair tax and repayment liabilities. (This might even require new currencies to be designed and printed.) Thus, there would be an emergency action prescribed, now overdue, followed by a long-term mathematical study and application, which would put think-tank people to work on something useful, once again, rather than chronically money-hungry bureaucratic manipulations.

We could go on and on from here, breaking the above suggestions down into a lot of particulars. But I would mostly hope our descendants will carry this ball more successfully, perhaps in spite of the ragged mess it has become in the hands of my age-class.

Originally Posted By Sagredo
I disagree that farmers are at the mercy of the stock market, as crops are not stocks, but commodities, where the prices aren’t determined as much by trading and speculating as by the actual supply & demand for the product.

This is certainly true for the most part, although I do get the feeling sometimes that the price of commodities is very much at the whim of what is fashionable with stock traders at the time, rather than purely supply and demand as it should be (although once I agree that this is the main thing).

I certainly don’t think, however, abolishing the market would be a smart idea, as getting rid of it would create more problems than there are currently with the stock market (regardless of how it’s handled).

I agree with you in practical terms – if we just abolished it overnight, I can’t see how we could avoid a financial catastrophe in the short term. Perhaps somebody who knows a lot more about it than I do could figure out a safe way, but I can’t see any government being brave enough to do it in any case.

I think that it is imperative now to find a way to make corporate execs more financially responsible for their firms. Ultimately, this is all that can and should be done to avoid meltdowns like this in the future.

Do you have any specific suggestions for how?

As for the “growth by all means” philosophy of business, I think it is certainly a bad thing, & this was the whole reason the dot com bust occurred, which really initiated the market problems we are having today. I certainly don’t think, however, abolishing the market would be a smart idea, as getting rid of it would create more problems than there are currently with the stock market (regardless of how it’s handled).

I think that it is imperative now to find a way to make corporate execs more financially responsible for their firms. Ultimately, this is all that can and should be done to avoid meltdowns like this in the future.

None of this applies to public companies though. They are huge entities benefiting from enormous economics of scale, relatively stable revenue, and relatively predicatable costs – one or two parts of the business may lose money for one reason or another, but their sheer size should allow them to absorb that. If the fundamentals of the business are sound that is, and they don’t borrow too heavily – in other words, if they don’t try to grow beyond their means, as is encouraged by the stock market.

For example, the market price of corn may be quite good right now, but before a corn farmer can grow his crop, he may need a short term loan from a bank to buy the seeds, the fertilizer, fuel for his tractors, and pay his farm hands. If he can’t get a bank loan, he could use his savings, but that may mean that he may not have enough money to plant all his acres of farmland. Because he planted less, the amount of profit he makes from the sale of his corn will be less and that will make getting by the next year even harder. If a hundreds of other farmers can’t get loans and are planting less, the price of corn will go up which get passed along as higher food prices, and create inflation.

To be honest, before I wrote this article, I was a little concerned that I may be missing something, as a lot of the minutia of modern business and economics goes right over my head, and quite frankly makes my eyes glaze over! But I don’t think I am missing anything: I think it’s time we all got back to the first principles of how businesses should be responsibly run. We really ought to be applying the same rules of responsibility to business that we do to individuals – it’s just plain common sense.