Much, Much More of the Same

If Jeff Snyder’s understanding of the mechanics of the bailout is correct, then the goal of the whole buying of worthless debt from banks is to put them in a position to lend even more. Again. And again. And again. It’s the kind of repackaging and selling of debt that created this mess in the first place. Only now, there will be absolutely no incentive for them to make anything even remotely resembling good loans, since they know with absolute certainty that the government WILL come to the help in the event of trouble.

One reader of a previous blog post of mine wondered if inflating the country’s way out of debt would work if employers didn’t raise wages. As I was driving back from a visit this morning to a housebound parishioner, it occurred to me — if the banks are in a position to lend more thanks to government assumption of their debt, then they can and will. Wages won’t need to rise if Americans are encouraged (possibly forced?) to borrow more. Indeed, if Americans need to borrow more in order to make ends meet. And thus the creation of Bush Jong Il’s ownership society nation of sharecroppers continues apace.

Americans get hit several ways in this. First, they accumulate personal and household debt they are never able to pay back. Second, they will have to borrow more and more as inflation erodes the value of the currency they are loaned. Third, they will have to pay higher taxes to service the debt the government took on bailing out the banks. It’s lose-lose for most Americans, win-win for major shareholders and managers of large financial institutions. Definitely a win for the state and its minions.

But you know, I suppose there’s always consolation in waiving the “we’re #1!” foam-rubber finger, in being able to have the newest and biggest flat screen teevee in the corner of the room, in sending one’s sons and daughters off to kick foreigner ass, and in knowing that the Republicans who are enslaving you aren’t effete, cappuccino-drinking, New York Review of Books-reading, commie-perverts from great big coastal cities.

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10:57 am on September 25, 2008