It is almost three years since this was published, just as the financial and political crisis was becoming public knowledge. It is even more true in 2011, as the EU and US stumble towards their own default crises.
Nothing that the banks or politicians have done since the crash of 2008 has changed this blunt analysis. Only the numbers are different. They're now much bigger. Politicians are finally using the default word. And it's not just corporations at risk, but whole countries.
The $700 billion bailout has to be created as electronic debt - worth less than textured paper of a banknote. Since it's not going to be used to buy goods from the Japanese or Chinese, you might say it's not even part of a value transaction.
The effect of printing money is rather to depress value. In this bizarre world, the less money is worth the more that's needed to buy something. So the value of assets goes up. President Bush in Tuesday's speech insisted the toxic assets could, if held for some years, be sold at a profit.
If that was the case, there would be no need for a bailout. Banks could seek a counterpart in the market or just sit on their assets until they recover in value. The problem is, they were so wildly overvalued, they are not going to recover in value.
How were they so wildly overvalued? You won't read it in the FT or the Journal because it would sully their fine newsprint.
A default crisis
This is not a liquidity crisis. On Tuesday night, European banks deposited well over 100 billion euros at the ECB. The banks were not prepared to leave their money for even one night in a retail bank. Perhaps, they know something we don't?
If the banks deposited 100 billion there is no shortage of cash. The point is they won't lend it. Not to each other, not to companies, not to home buyers, except at rates which make a mockery of the word 'lending'.
This is a default crisis. Banks and large corporations are going to default. The banks know that. The public do not yet. Unless...
Several alternatives
Hank Paulson, the dour looking ex-Goldman Sachs trader worth $500 million, says there is no alternative to buying the banks failed betting slips.
There are several alternatives. One is to let the Japanese and Chinese buy the US's failed investment banks. They already own large chunks but politically the US cannot stomach Asia buying the Ivy League banks.
Barter their assets. In 1998 the IMF told Russia that it should not bail out its banks. Ten years later the IMF is encouraging the US to do just that. One rule for the emerging markets, another for the Masters of the Universe.
Russia dealt with illiquid banks by knocking their heads together and forcing them to swap assets at knockdown prices. Washington does not have the grit for that. It proposes using taxpayers money to buy assets the banks don't want. It is a recapitalisation of the banks by stealth and lie.
God help us.
Nothing that the banks or politicians have done since the crash of 2008 has changed this blunt analysis. Only the numbers are different. They're now much bigger. Politicians are finally using the default word. And it's not just corporations at risk, but whole countries.
The $700 billion bailout has to be created as electronic debt - worth less than textured paper of a banknote. Since it's not going to be used to buy goods from the Japanese or Chinese, you might say it's not even part of a value transaction.
The effect of printing money is rather to depress value. In this bizarre world, the less money is worth the more that's needed to buy something. So the value of assets goes up. President Bush in Tuesday's speech insisted the toxic assets could, if held for some years, be sold at a profit.
If that was the case, there would be no need for a bailout. Banks could seek a counterpart in the market or just sit on their assets until they recover in value. The problem is, they were so wildly overvalued, they are not going to recover in value.
How were they so wildly overvalued? You won't read it in the FT or the Journal because it would sully their fine newsprint.
A default crisis
This is not a liquidity crisis. On Tuesday night, European banks deposited well over 100 billion euros at the ECB. The banks were not prepared to leave their money for even one night in a retail bank. Perhaps, they know something we don't?
If the banks deposited 100 billion there is no shortage of cash. The point is they won't lend it. Not to each other, not to companies, not to home buyers, except at rates which make a mockery of the word 'lending'.
This is a default crisis. Banks and large corporations are going to default. The banks know that. The public do not yet. Unless...
Several alternatives
Hank Paulson, the dour looking ex-Goldman Sachs trader worth $500 million, says there is no alternative to buying the banks failed betting slips.
There are several alternatives. One is to let the Japanese and Chinese buy the US's failed investment banks. They already own large chunks but politically the US cannot stomach Asia buying the Ivy League banks.
Barter their assets. In 1998 the IMF told Russia that it should not bail out its banks. Ten years later the IMF is encouraging the US to do just that. One rule for the emerging markets, another for the Masters of the Universe.
Russia dealt with illiquid banks by knocking their heads together and forcing them to swap assets at knockdown prices. Washington does not have the grit for that. It proposes using taxpayers money to buy assets the banks don't want. It is a recapitalisation of the banks by stealth and lie.
God help us.
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