Sunday, February 1, 2009

Basic Economics

In October I was a broken record, commenting on whatever site I could that was accusing Obama of being a socialist. I argued that President Bush and both parties were dabbling in lemon socialism and that the September bailout would probably be a transfer of wealth upward. If obama is a socialist, so were the Bush Republicans. Here are two responses made on a pro-Bush blog:
Comment #1 Oh geez Masked Liberal Evangelist please don't tell me you've bought into the MSM hype regarding that insane B.S. Hussein the Inane is spreading...If so YOU should consider getting a grip on Basic Economics?
Comment #2 (Excerpts)
mad, masked... whatever, lefty liberal....The whole thing from the beginning was socialism.Why don't you try starting with the beginnin of the story?ACORN and Obama? Start there for your socialist intrigue and plot line from the get go, with Jimmy Carter, Bill Clintion and the Democrats.This started a long time ago…
...Also, Stop being Stuck on Stupid. You cannot redistribute wealth from the poor that never pay taxes. You can only redistribute wealth from those that do pay taxes. The only reason we are in this mess is to many people allowed the Socialist programs of "afforbable housing" to proceed forward with no oversight. This was done by the very Foxes guarding the henhouse today. Dodd, Franks, and Obama.They're all guilty of ripping off the American people. They should all be fired and normally would in any other work in life.

When the Bush Bailout in the Fall was being debated, we were told the money was going to free up credit and help struggling homeowners avoid foreclosure. But, as reported in the New York Times and on Fox News , a Congressional oversight panel found no evidence the bailout program had been used to prevent foreclosures. So where has the money gone?

I saw an AP story this morning: Banks sought foreign workers
Banks collecting billions of dollars in federal bailout money sought government permission to bring thousands of foreign workers to the U.S. for high-paying jobs, according to an Associated Press review of visa applications.

Why would banks want to bring in foreign workers? Because they can pay them less. It's Basic Economics.

Another instructional article appeared in the NY Times the Sunday just before the Inauguration:
Bailout Is a Windfall to Banks, if Not to Borrowers
At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money.
“Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

The McIntire article also revealed the position of Boston Private Wealth Management, a bank given $154 million:
"With that capital in hand ... we'll be in a position to take advantage of opportunities that present themselves once this recession is sorted out."

More reports of lavish spending on new corporate jets and million dollar office redecoration appeared in the NY Times last Friday concerning $18.4 Billion Wall Street Bonuses.

So what Basic Economics can be learned from this mess? I'll quote Alan Greenspan.
“I made a mistake in presuming that the self-interest of organisations, specifically banks and others, was such that they were best capable of protecting their own shareholders,” he said.
Greenspan called this "a flaw in the model that I perceived is the critical functioning structure that defines how the world works."
In other words, the past understanding of Basic Economics was wrong. Pass the hopium and try and get this next stimulis package right this time.

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