Thursday, September 18, 2008

Robin Hood Hank (Paulsen) 
A co-worker of mine, a rabid right-winger, was commenting yesterday about how Barack Hussein Obama (as he always calls him) wants to use US tax policy to redistribute wealth. I can at least understand, if not sympathize, with that point of view. But he, like the vast majority of so-called conservatives, has chosen to ignore that this is exactly what the Bush administration, over the last 10 days or so, has been doing - redistributing wealth. Only they've been doing it in reverse - rather than stealing (as my colleague would call it) from the rich to give to the poor, they're engaged in taking the debts of the rich and saddling the the rest of us with them.

Single payer? 
The US Treasury now owns AIG's regulated insurance businesses.

In effect, we, the US taxpayers, own a health insurance company. So can we get us some health insurance now?

No atheists in foxholes? 
With the proviso that I'm no expert in financial markets (is anyone, really?), I have to say that one of my worries, more than the AIG fallout, is Lehman's bankruptcy.

Because a court will need to determine what their assets are worth, the credit derivatives they hold will have to be assigned actual monetary values, and those values will almost certainly be far lower than the value ascribed to them in Lehman's books.

Problem is that many financial services firms are carrying those same securities on their books at similarly inflated valuations. Hence, once the values are set by the court, all those other firms may suddenly find their assets have shrunk by many billions of dollars. Whoosh ... watch money evaporate! Whoosh - watch firms fall like dominoes as their creditors see just how undercapitalized they actually are.

Another worry - in taking over Fannie and Freddie, the US Treasury overnight added $5 TRILLION dollars to the national debt, effectively doubling the US debt load. That's $5 trillion in what was once private debt that is now public debt. The Treasury can't just print that much money - it will have to be raised by taxation, or by additional borrowing, and the credit markets are not a bottomless well. We're in some seriously deep shit here.

There's an old saying that there are no atheists in foxholes. Well, apparently there are no conservatives in financial meltdowns, either. Inside every free-trade conservative is a socialist waiting to be set free. This week, a lot of them made it into the open.

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