In today's Op Ed piece published March 31st in The New York Times, Obama’s Ersatz Capitalism, Joseph E. Stiglitz lays out the the problem with the Obama (Geithner?) bank bailout plan. It's a swindle of taxpayer money to benefit the banks that helped get us into this mess.
And when we start thinking about the government coordinating the auction of banks' toxic assets ... for the purpose of recapitalizing the banks ... so they can start lending ... so we can start borrowing and spending? What's wrong with this picture?
Geithner seems to believe these toxic assets have real value, and by getting them priced "realistically" it will put the financial system back on its feet.
He probably hasn't visited many ghost towns where the buildings are still standing because they are worth less than the cost of their demolition.
Financial gurus lose sight of the fact that money and other financial instruments have no value in themselves. Their value derives from adding efficiency in making transactions in the market between seemingly diverse elements, including the guarantee of future events ... allowing us to pay for something such as a home or auto over its use life, instead of up front. (However ... when you start paying double-digit interest on groceries bought on a credit card, or lose the means — a job — for making the payments ... dah!)
At the end of the day — as in, "at the end of the bubble" — if there aren't other real goods or services to put up to back up whatever financial instruments are in play ... well, golly gee whiz ... why DO bubbles keep happening? And aren't we watching the Obama financial team repeating the basic "borrow to invest more than we will ever be able to repay (or get back)" of the bubble syndrome?
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