Bankia, one of Spain’s largest
banks, is needing a €23 billion bailout, to compensate for their over-zealous investments
in the country’s late real estate boom gone bust. Throw in a few other
teetering banks and the price tag rises to €50. The only way to thrive or even survive
in a scenario of irrationally exuberant lending is to borrow more to keep the
growth paradigm going. In other words, as long as the value of property is
expanding, it’s not necessary to be rational in your investments. But then, as
always happens with bubbles, they burst - it is a part of their nature, after
all.
There are two ways that happens,
though they’re often intertwined. One is inflated prices. At a certain point,
prices have to reflect reality. The other is larger economic movements. The
general economic malaise that pervades the country depresses optimism and
growth. Either way, the loan is defaulted and somebody is going to have to pay.
Spain wants the European Central
Bank to bailout the banks directly. That makes sense, since it’s the system,
the paradigm, which encourages, almost demands imprudent lending. Used to be
you had to put 20% down to buy a house. A buyer who’s accumulated that much
cash will generally be a low level risk. However that would also constrict the
market and slow down construction so we can’t have any of that. Instead the
establishment wisdom is to push the economy to the limit, go for broke, the
more growth the better.
The country is also at fault
since it could’ve established rules and policies designed more for stability
and prudence than growth at any cost. That would not be an easy task in today’s
financial environment. There are only so many Hugo Chavez’s in the world who
could ignore the dictates of the establishment view.
The borrower, of course, must
take a substantial portion of the blame for the broken contract, but ultimately
is has to rest with the bank to assume responsibility and take the loss.
Banking is about risk; banksters know the level of risk they are undertaking.
If you aren’t smart about lending your money, who else is supposed to
compensate for your inadequacy?
Actually it’s the taxpayer who
coughs up since some type of deposit insurance is essential to a functioning
banking system. (But not in Cambodia, here you’re on your own.) There should be
no question or hesitation when a bank gets into trouble; it should be shut down
and small depositors paid off. There’s no good reason to keep a stupidly or
irresponsibly run bank alive. Also as long as the taxpayer is on the hook to
insure depositors the government has responsibility to properly regulate to
prevent speculation that has the potential to get the bank into trouble. However,
since the banksters own the government, at least in the US, we know there can
be no changes on that front.
In Europe it may be different,
since they have a more socialist, egalitarian political outlook and the people
are hopping mad. Still, there’s a very powerful push on the part of the
financial establishment for European countries to ‘take their medicine’, that
is, to strip any benefits that might aid the 99% so that they’d have the money
to feed the banksters.
Still, can you imagine, Spain
coughs up €50 to protect the banks at the same time they’re slashing safety net
funds in an economy with 25% unemployment? In fact, latest news is that the
Spanish government has accepted a $125 billion loan to bailout its banks…
anything to protect the banksters.
The European establishment may be
forced to change the paradigm but Americans will never get it together if the
recent recall result in Wisconsin is any indicator. Governor Scott Walker, who
was elected in a Tea Party surge in 2010, started off giving $180 million in
tax breaks to business and then discovered there wasn’t enough money to pay
public employees. His ultimate goal, unstated in the campaign, was to break the
public unions, which he proceeded to do by virtue of Repug control of both
houses of state government.
This didn’t sit well with the
unions or the progressive community so they fought back with a signature
gathering campaign to recall the governor. The got the necessary signatures,
all right, but lost badly in the election with Walker sustained in office by a
53% to 46% vote. There are two immediate reasons why the Repug won. The most
important was the flood of money from right-wing billionaire assholes.
According to the US Supreme Court - which today garners the support of only 44%
of the people - money has the right of free speech. The other reason was that
Obama gave the campaign neither financial or moral support. The feckless wonder
did not stand by the people. The Dem running against Walker had $4 million and
was outspent 8 to 1. Obama made $3.5 million in one fundraising event but
couldn’t see his way to helping a fellow Dem.
The fundamental reason for the
Dem’s defeat is that Americans, at least a lot of them, are political morons.
It’s called the Fox News effect: A recent study showed people who watched Fox
were less informed than people who watched no news at all. It’s people who rail
against socialism at the same time they love their Medicare, that socialist
program that would save the country $400 billion a year if it applied to everyone.
It isn’t just the average low IQ wingnut dolt that doesn’t know their ass from
a hole in the ground. You’ve got Romney and the Repugs insisting on programs of
slashing public services to pay for tax cuts for the wealthy as a path to
economic recovery when that’s been an abject failure since Reagan.
Once again Americans face a
disheartening lack of choice this November, though the country will slide
downhill a little slower with Obama at the helm. In the end result, the people
get the politics they deserve… unfortunately.
