Monday, September 29, 2008

The US Needs a Serious Ass Spanking

The arrogance I see in the traders of Wall Street and the members of congress is insulting.

How dare you schumcks, you dumb American people, you insignificant plebs insist there is no bail out

.

How dare you morons, you simpletons who can’t possibly understand the complexities of spending less than what you make, refuse to bail our corrupt, spoiled rotten asses out.

Don’t you know who we are? We are the leaders of the United States. This is not a democracy, we tell you what to do. Not the other way around.

The beauty of this bail out getting shot down in flames, is that it bitch slaps these bastards right upside the head and harshly reminds them that it is THEY who work for US.

I don’t know about you, but I did contact my representatives in congress and basically said that if a bail out did go through, I would not only not vote for them, but fund their competition come the next election season. It seems a couple million of you did as well, for some true STATESMEN did their duty and voted in the best interests of the people.

But there is something that must be discussed or at least clarified here. And the reason is because we’re told that this bail out is absolutely necessary. That it is needed and if we don’t get a bail out of some sort, then “main street” will be harmed by the follies of Wall Street.

B as in B

S as in S.

Let me try to explain it in a manner that won’t put normal non-economist people to sleep.

There is a certain, fixed amount of economic pain that this country has to go through for its financial sins. For spending more than it makes. For putting everything on a credit card. For refusing to work for the things we want. And if we can’t afford it, oh well, we’ll just file for bankruptcy.

This amount of pain is unavoidable. We cannot escape it. We are suffering the beginnings of it right now, but we do have an option of how we want to endure it. It’s the classical;

“Do you jump into the cold water and get it over with in one shot? Or do you ooch in, inch by inch and acclimate yourself slowly to it.”

The first option, just “jumping in” as it were, would be where there would be no bail out. We let the markets fall to wherever they may. A bottom will be found, the market will stabilize, assets and resources will be reallocated, we’ll go into a sharp recession, but it will be over with within a year.

The second option is to go through with the bail out and instead of suffering one big hit, borrow or print off more money to spread the pain out over time. This is more of the “FDR” approach to the Great Depression (which is half the reason it lasted so damn long). There will not be as a sharp recession or as sharp of a jump in unemployment, but the economy will be slothful, with growth minimal and under 1% for at least a year, and unemployment will still go up and remain there stubbornly for the foreseeable future.

Now most paradoxes, the choices are equally appealing or unappealing. This is why they’re called “paradoxes.” But in the case of the bail out, there is no debate; the jump in the water approach is immensely more beneficial than the ooch in approach. And the reason why is a long lost art form in the United States;

Punishment.

Punishment is a good thing. Arguably the majority of the social, economic, and crime problems in the US can be traced back to a lack of punishment, namely a lack of heavy handed fathers. An unwavering father-figure that would state what is right, and what is wrong, didn’t give a dam what you thought, and by God if you cross that line, you are getting punished.

Now the benefits of punishment is if you have a father who genuinely cares about you and loves you, he will have no problem disciplining you as it is in your best long term interests. You may not have liked it at the moment when you were 7 and getting spanked for shaving the dog (guilty), but when you got older you were immensely grateful for those harsh lessons your father insisted upon you in your youth. And when it comes to a country, it’s no different.

Unfortunately here in the US as a society have been brought up by a bunch of pansy, sensitive 90’s type wussy fathers. Congress never being able to tell you no. Money for everybody and everything. And did you do a naughty thing? Well, “what did congress do wrong? Did we not give you enough money? Would you like some free college tuition and health care and cake and pie and apples and candy?” And good lord, could there be a better example of an utter lack of fatherly wisdom and guidance than the public schools? Children can do no wrong. And if they do, how much of the taxpayer’s money can we give you?

Alas, now daddy’s little girl has come home and told him that she not only stole his credit card, but racked up $700 billion in bad mortgages on it. Daddy’s little girl being the financial deadbeats who knowingly or ignorantly took on more debt than they could afford or the banking scumbags who were all too eager to give the $700 billion to people who really weren’t any more intelligent than a 14 year old suburbanite princess.

What does Daddy do?

Does daddy say, “Oh, I’m sorry sweetie. What did I do wrong? How did I fail as a father that you racked up $700 billion of other people’s money? Maybe you need therapy. Maybe I need therapy?”

Or does Daddy say,

Bend the ef over, I am going to spank you freaking silly and then ground you until you are 40. And not only that, on top of it, I’m going to send you to the work house to ensure you pay all $700 billion back and if you have to work until you’re dead, so be it.”

This is the ultimate reason why the “jump in all at once” approach is better than the “ooch in” approach. Because punishment will be served. Justice will be done. Revenge will be savored.

If there is no bail out, then daddy’s little princesses are going to get the punishment they so rightly deserve. The financial deadbeats will get no “federal aid” to support their habit of being freaking morons and spending more than they make. The arrogant charlatans of our times known as bankers and politicians and all their political cronies who have vested financial interests in the financial services industry and have parasited off the back of the millions of hardworking Americans will have to (OH MY GOD) become HARD WORKING AMERICANS! But key to this all, and why this approach is infinitely superior to the ooch in approach, is because punishment on the order of making these bastards eat all $700 billion of THEIR OWN MESS will make them never again screw the American people over for their own selfish interests. And yes, we may go through a harsh recession. And yes, unemployment will go up. And yes, you Americans will bitch and whine about it. But in the end, we will have a more responsible society as those who were irresponsible will be perpetually impoverish to the point of financial incripplement, and the rest of America can move on (at a higher rate of economic growth I might add), unencumbered without them.

All it is, is a simple matter of reminding those bastards in Washington who’s in control. It is within your power. The arrogance of “congressional leaders,” George Bush, Paulson and the other elites out there to DEMAND we give them a bail out (for as far as I can tell is to ensure elitists stay wealth at your expense) is the most compelling reason why not only they should be voted out of office, but why you, as an American citizen are compelled to call your congressional representatives and demand there be no bail out whatsoever.

Because, after all, this is a democracy. And congress, as well as president Bush needs to be reminded of “Who’s their daddy.”

Oh, and buy my book already! To quote Bill Cosby "It'll make you smart!"

22 comments:

Paul E. Zimmerman, M.A. said...

Hrm... heavy on the punishment angle here. Are you seeing that dominatrix again? ;P

Sam23 said...

Right on, Captain!

Krig the Viking said...

Posts like this are the reason this is the first (and usually only) site I come to when I want to understand a financial issue, and what ought to be done about it. Not only are you usually right, but you understand and can explain why you're right.

Keep up the good work!

Jon said...

Dear Captain,

I agree with you, and it's nice to see that someone actually has a conservative point of view on this issue. People need to be held accountable for their mistakes.

It's outrageous that a 27% approval rating president and a 9% approval rating congress is willing to tell the American public what they should do.

Bless you for all your outstanding work

cousinarlo said...

I like your thinking Captain. It is way, way past time for the non-producing leeches to pay for their own mistakes.

The way they wax each other's candles and then complain about the stain really ticks me off.

kcspence said...

The wrathful populist in me agrees wholeheartedly. The 401k and IRA holder in me is very concerned about what happens to my portfolio in an environment where viable banks are unwilling to lend to each other.

If there's no capital, there's not much chance for robust capitalism, Captain.

Half Canadian said...

I have to say that you make a compelling argument. The generation that grew up during the Great Depression (my grandparents) were famously frugal, because they knew what it was like to go without, what it was like to work hard.

Jumping in right away will hurt, but it may 'save' American culture.

Anonymous said...

Great post. I think you mean "dilemma" and not "paradox".

Captain Capitalism said...

Hey Paul,

I'll have you know that when I get to the Pearly Gates and St. Pete asks me why I should be let into heaven, I'll say with a dead serious face;

"because I dated the premier dominatrix in Minneapolis for two months without knowing she was a dominatrix and since I was denied heaven on earth I'm damn well entitled to it here."

I presume I will get in.

Mothball said...

You're much better than that faker Ace over at AoSHQ, and half the asshats over at Hotair.com

I'm coming here.

randian said...

There is no slapping here. The Democrats control the House. Pelosi wanted this bill to fail, so it did. I have no doubt she is playing political games so the Democrats can

a) cast more blame on the Republicans
b) insert the many objectionable items (ACORN funding, bankruptcy changes, etc) back into a replacement bill

Ron said...

I get your point, but this is no more punishment than gravity and impact is punishment when you fall.

It's just reality being what it is.

Ron said...

If there's no capital, there's not much chance for robust capitalism, Captain.

The capital hasn't disappeared. This is just a fight about who gets to keep it, and--if it's the government keepin' it--how much they get to pretend it's worth.

Capitalist Pig said...

Cappy, one question though: why does Ben Bernanke, a scholar of the Great Depression, say the bailout is necessary? Why not just say what you said: "It will be painful, but it will be quicker, and it's best to just proceed without any bailout" ??

Capitalist Pig said...

Hey Cappy, well I asked a guy at another forum who supports the bailout about your post, here is his critique, was wondering what you thought...?

I think it illustrates the problem nicely. From the article:

"Because punishment will be served. Justice will be done. Revenge will be savored."

From inception, the policy has been called a bailout. But it may be worthwhile to pause a moment and ask who is being "bailed out"? Who gains from the "bail out"? Who loses if it goes into effect, and who loses if it does not? These are not rhetorical questions; rather, they may serve to illuminate the problem.

When a bank is bailed out, the shareholders will lose much, and perhaps all of their investment. Were the shareholders the ones who created the crises? Hardly; they may be guilty of a poor investment choice, but little other than that. The senior executives and the board bear responsibility, but their punishment consists of losing their jobs. The rest of us - the society as a whole - suffers the consequences of reduced availability of credit coupled with reduced business activity. So in pursuit of justice, we have punished ordinary people who seek to find a job or run a business. This does not seem productive or appropriate. Thus, we are not bailing out the purported rich wall street bankers so much as we are attempting to bail out the national and global economy.

The article suggests that the sharp pain of recession will be brief, but salutary, and will impose the discipline of the markets. Perhaps. As we scourge the improvident and the foolish, what price will we pay in terms of future economic activity? We can look to history for an answer. England used to have a debtor's prison, where those who did not pay their bills could be incarcerated until the debt was paid. The U.S. chose not to adopt that model. Why? Could it be that there is more to be gained by writing off the debt and letting the debtor return to economic life? As a thought experiment, should we consider re-instituting the classic approach, and jail those who do not pay their mortgages? How much pain (punishment) should we hand out? What is the optimum level, from the perspective of the country as a whole?

I get the sense that many agree with the quoted sentiment - someone, somewhere, needs to be punished. Someone, somewhere, needs to be flogged. And if that someone happens to be a rich guy that got tripped by his own sly plots, so much the better. This is, however, overly simplistic. The purpose of the bill is not, and never was, to save the rich. Rather, the real cost, whether there is a bailout or not, will be paid by the middle class taxpayer. It becomes a question of how we want to pay. We should choose wisely.

I wonder if a sense of angry moral outrage, such as the article seems to voice, brings us closer to a rational decision. I think it does not.

Alfred T. Mahan said...

It seems to me, having read both this article and a number of other more scholarly (if less impassioned) articles, that what we *may* be seeing, finally, is the beginning of the end of the Keynesian/Galbraith model in American economics, with decisive government intervention to "shore up" the sagging economy, rathe rthan allowing the market to correct itself through market forces.

Frankly, as a historian and a capitalist, I can only say it's about time. Certainly there's a place for the Federal Reserve to stem complete market panics, but the role of the government outside of that realm should and must be much reduced in the economy.

Scott said...

Capt'n, I sent a link to this post to my congressman, along with a thank-you for not voting for the bail out.

I'd send one to my Senators, but one is the Chosen One, and the other is Dick Durbin, so I saved the internet's bandwidth...

dtrum said...

The second option is to go through with the bail out and instead of suffering one big hit, borrow or print off more money to spread the pain out over time. This is more of the “FDR” approach to the Great Depression (which is half the reason it lasted so damn long)

Fact is, the biggest part of the Great Depression, the great recession, was already over when FDR came into office. So the Great Depression equals the first choice you describe, namely letting the banks all go bust at once.

...because punishment on the order of making these bastards eat all $700 billion of THEIR OWN MESS will make them never again screw the American people over for their own selfish interests.

Did the Great Depression prevent the insanities of the S&L crisis, the dotcom bubble, or the current crisis? Sure, the bankers who were involved in those crises never made the same mistakes again, but what about all those younger bankers? People will make the same mistakes over and over again, until we finally decide to teach them proper economics in high school and college.

Should we jump into the cold water every couple of years/decades because of the ignorance of some idiots? I understand people like Paulson who say that we should take the second option.

she said: said...

Let me remind you of an old timey article:
http://www.wsws.org/articles/2002/aug2002/401k-a15.shtml

I think there are a few kinks in your indignant post. Especially in regards to failure of Americans to save. What exactly is the feedback loop anyway? Invest for the long term, people are told. They pour money into 401k's, and IRA's. Sure.. it is NOT cash. But it IS savings. So, people do that. They put money into a place they can't touch it. So.. you know, if they want to buy a boat.. they don't see all that money hanging out in their checking account. Out of sight - out of mind they say.

And let us not get bogged down with investing in the company you work for. It is of no consequence to this dialog.

Now let us talk about how many trillion dollar wipe-outs have happened in 10 years.

.com bust
enron
9/11
real estate bubble

Sure the market always goes up over time. It also goes down. You know where the dow was in 2000? High 10,000's. Where is it today? High 10,000's. It doesn't matter if the market goes up, if you are in a ill-liquid long term savings account. Also not helping othewise safe companies failing. If a company is round for 90 years.... you sort of have this feeling it won't go belly up. I know those people are bastards for thinking that.

When it happens though, you can do very little to mitigate your losses. By the time the shit hits the fan on wall street - trouble has been brewing for a long time.

So, people buy shit on credit. I don't endorse it... but it isn't all that hard to understand.

People get the sense that even if they work hard, they can't move ahead because the system is rigged against them. And if anyone who knows anything about the markets is being honest. It actually is.

The wealthiest get "whisper" news, and save themselves. Most normal hard working folks get f-ed. So while the whole thing pisses me off.. I understand why the feedback loop is broken.

Captain Capitalism said...

Dtrum,

I would point out that it took another (I don't know) 50 years or so before another bail out occurred as the great depression served as a deterrent (not to mention Glass Steagall). Now we had the S&L bail out in 1990-1991 and a mere 18 years later another banking bail out? With a stock market bubble in there no less.

If there was no bail out for the S&L's I would surmise we wouldn't be having the problems today as that sting would stay in bankers minds for another 50 years.

Alfred T. Mahan said...

I don't know if you can even call the Hoover/FDR actions during the 1929 Depression a "bailout" as we would understand the term; it was activist government intervention on a scale virtually undreamed of today, to the point where FDR felt he needed to try to appoint additional SCOTUS justices simply to approve his legislation as constitutional.

THAT's interventionism for you.

King said...

Thought you'd like this story: At a fundraiser last night, someone told me that Jim Ramstad got 1200 calls before the vote. 10 in favor of the bailout, 1190 against.

He's retiring, and could have easily voted for that bill with zero political cost. He decided to represent his constituents and vote against.

So it can work.