Note: When I wrote this article six months ago in the fall of 2008, I had no idea that the global financial situation would escalate to the degree it has and that things would get as bad as they are. I didn’t post this article when I wrote it because things were changing so fast, I was on to the next financial fire-storm du jour and this piece got lost in the shuffle.
In re-reading it recently I realized that some of the concepts are important enough to have some value if it were published today. Not surprisingly, we still are, after all, on the brink, with King Henry’s buddy, Tiny Tim Geithner, the new Treasury Sec’ty trying to pull yet another rabbit out of the hat and pull the wool over the eyes of the public while doing it. When are we going to wake up? – daniel w. jacobs
Here is the original article written in Sept. 2008.
Phew . . . it’s been quite a week to say the least. The week beginning on September 15, 2008 will be studied in economics, politics and history classes for decades as the defining moment when we were on the brink of economic collapse of the country.
Then at the last-minute, Sect’y of the Treasure, (King) Henry Paulson, stepped in and announced that help was on its way. The Federal Government was here to rescue us with a financial infusion of nearly limitless amount, though the initial number is $700 billion to “save the day” for Wall Street from improvident loans, incompetent management, greed and arrogance.
Oh yes, (almost as an afterthought), and also to rescue Main Street from the pain of no credit, foreclosure, no jobs, and other painful adjustments we would have to make, due to the egregious mistakes of those in charge of making sure these things never happened.
King Paulson wants seven hundred billion dollars (to begin with) to buy “sludge, bad paper, junk loans” to rescue Wall Street. And the CEO’s and other “C-level” executives walk away with fat severance packages worth millions. All with little or no oversight and with immunity from any prosecution on Paulson’s part. It reads a lot like a Grisholm novel, except that it’s not fiction; it’s very real and very dangerous.
In my opinion it all traces back to a rather simple, three-step plan being used on us without our knowledge.
First, the Government creates the problem .
Second, we all react like rats in a cage.
Third, the Government suggests a solution.
Then inevitably, the solution turns into a new problem! and the three-step program starts all over again.
Why? Because the proposed solution to the problem turns into an even bigger problem requiring an ever more desperate solution.
It goes back to a well-known axiom that if you don’t face the problem it tends to persist. Also, if you adopt a solution that only covers up the problem, that solution will eventually come back with a vengeance as a new and bigger problem.
An easy example is with your car with that annoying “service engine soon” light flashing, or that oil light that keeps coming on. The piece of black tape over the light removes it from sight, but the problem still continues . . . and gets worse. Eventually some emergency will occur at the least desirable time, demanding that something be done now! Ignoring the warning signs is a dangerous way to live.
Yes, I admit that Paulson had to come up with something, fast, to stop the hemorrhaging in the markets and try to restore a semblance of confidence to our country and the world. We couldn’t just do nothing. And it may be that this finger in the hole of the dyke may provide some temporary relief from the pain of having to confront the real situation. But, like a life-threatening disease, it will come back unless we rid ourselves of the true source of the problem.
The deep situation underlying this emergency is that the people who were paid, trusted and assumed to be doing their jobs to not let this happen, were asleep at the wheel. We were betrayed by their self-interest, greed, envy, arrogance, pride, and fears. These factors and more kept them from facing what was happening and taking effective steps to handle it when it could have been controlled without having to call on Uncle Sam to bail them out.
They are private companies, making their own rules of convenience, ignoring or avoiding the legalities that did exist because they “know best” what is good for the company, the country and most of all . . . themselves. What do they care really if the company goes down, they’re set with their golden parachutes and closed-door deals with friends.
This requires several steps that on the surface may be painful. I assure you however, that it will be far less painful than not doing them. We’re facing some very choppy waters ahead of us and we’d better batten down the hatches fast before this ship of state goes down with all flags struck. It can happen you know.
daniel w. jacobs
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