IS THERE A SOLUTION TO THE UNDERLYING FINANCIAL MESS?

DLC's Bill Clinton joins GOP bloodsuckers to kill Glass-Steagall

I spent most of December and January in India and Southeast Asia. At the time I posted that their-- especially China's-- inflation was headed our way. The Bush Regime agenda has mandated it and the current financial policies are bringing it on even faster that I expected at the time. This morning's Washington Post dares to speculate that inflation is looming, although one wonders what the gargantuan increase in the cost of energy since Bush and Cheney took over (with the help of Big Oil) seems like if not inflation.

People were excited to see the Dow Jones soar yesterday because of another interest rate cut. A good day does not a healthy market make. Unfortunately, that is likely to help set off an inflationary spiral because by "reducing the interest rate financial institutions charge each other for short-term loans, the Fed makes money more readily and cheaply available. If it miscalculates, it can pump too much money into the economy, fueling excessive demand for goods, housing and capital spending-- and driving up prices... Through higher consumer prices, all Americans would effectively help pay for the rescue of the financial industry.

And the laws are written by the legislators bought and paid for by the banks and oil companies and lobbyists and those laws, which have gotten significantly worse in the past 7 years-- are meant to protect the ill-gotten gains of the authors of the current crisis, while penalizing the rest of us.

The threat of inflation was evident in commodity markets yesterday. Though at historically high levels, prices for corn and copper rose on the expectation that the Fed rate cut would breathe new life into the economy and avert a drop in demand. Oil prices jumped more than $3 in New York to $109.42 a barrel.

Commodity price hikes could translate into higher prices at gas stations and grocery stores. Airlines will be less likely to get relief. Yesterday Delta Air Lines offered voluntary severance payouts to about 30,000 employees, more than half its workforce, as it restructures to adapt to high jet fuel prices, among other problems it faces.

The Labor Department reported that the producer price index for finished goods rose 0.3 percent on a seasonally adjusted basis in February after a 1 percent increase the previous month. Food prices fell last month, while prices for consumer products, automobiles, prescription drugs and other goods rose.

...Lee Hoskins, former president of the Federal Reserve Bank of Cleveland, co-wrote a Forbes magazine piece that compared the current economy with that of the 1970s. "The Fed has abandoned the one thing it can truly control-- the long-run increase in price levels-- in a self-defeating attempt to keep the economy growing," he wrote. "Creating more dollar bills will not add to the nation's wealth, or make workers more productive."

And Hoskins is hardly the only economist worried about Bush Regime quick fixes. Last night former Federal Reserve Chairman Paul Volcker was interviewed on the Charlie Rose Show and this morning's Wall Street Journal has some sobering excerpts. He doesn't seem to think the Fed should be bailing out robber barons with our tax dollars.

Volcker: We’ve seen the Federal Reserve take more extreme measures in some respects than any that have been taken in the past to deal with a financial crisis, which raises some real questions about not only for the Federal Reserve and its authorities, but for the structure of the financial system… The Federal Reserve is designed to lend to banks. And the banks were considered to be at the center of the financial system, and lend liquidity, provide cash in return for good assets, when a bank got in trouble. Now they found in this case, where some of the investment houses were in trouble, and prototypically Bear Stearns … it’s lightly regulated by the SEC or some other, but not for the same reasons. They haven’t got the concern over the stability of those things….We’re going to lend to them and protect them, shouldn’t they be regulated?

Rose: Is it a wise precedent?

Volcker: Whether it’s wise or not depended upon how severe this crisis was and their judgment about the threat of demise of Bear Stearns. That’s a judgment they had to make and an understandable judgment. There is no question about it.

...Rose: Has [the economy] bottomed out, or have we seen the worst?

Volcker: Look. The basic economy is not irretrievably damaged in any way, shape, or form. We had to go through an adjustment, which is tough. It’s happening much quicker. You’d rather have it happen gradually. But I’m optimistic that, okay, we’ve got to get the consumption down, we got to get spending in line with our capacity to produce. I think that’s going on. And that process is going to take a while. If we can stabilize the financial market, we ought to come out of this. Then we’ve got a lot of work to do about what we do with the regulatory system, the supervisory system, what the role of the Federal Reserve is, what the role of the Treasury and the government is, because this is a different financial market.

You thought you wanted to have a beer with George W. Bush back in 2000? Now you're going to have to cut back on  what you consume. You know what that means? Think about it when you listen to the hateful rants by the Republican propaganda networks about Obama's preacher and Hillary's lesbian Arab lover or whatever crap they decide to throw at either one of them. They'll say and do anything to force a third George Bush term on us. Don't buy into it.

If you're having a hard time grasping the intracacies of all these economic news-- and who isn't?-- today's NY Times has a kind of a primer to make it almost easy enough for McCain and Bush to grasp.

The part about the housing crash seems simple enough. With banks whispering sweet encouragement, people bought homes they couldn’t afford, and now they are falling behind on their mortgages.

But the overwhelming majority of homeowners are doing just fine. So how is it that a mess
concentrated in one part of the mortgage business-- subprime loans-- has frozen the credit markets, sent stock markets gyrating, caused the collapse of Bear Stearns, left the economy on the brink of the worst recession in a generation and forced the Federal Reserve to take its boldest action since the Depression?

I said almost easy enough for McCain and Bush to grasp. Bush is too stupid and disinterested and McCain is too pig-headed-- a classic know-it-all who will never learn anything-- but you can try to go through it. It isn't that hard. I read it and understood it and... it doesn't help figuring out anything in the real world that I can do to protect myself-- other than to not vote for any Republicans. But we all knew that already, didn't we?