A Bailout we Don’t Need-New Paradigms

Posted 1 month, 4 weeks ago (Sunday, October 5th, 2008 at 4:12 am) by nick

By Nick Polimeni

James K. Galbraith’s in his “A Bailout we Don’t need” in the NY Times, makes suggestions that are rational, and would be viable to eliminate the need for the bail out bill. He admits, however, that his solutions are not going to help the economy recover quickly:

“Two vast economic problems will confront the next president immediately. First, the underlying housing crisis: There are too many houses out there, too many vacant or unsold, too many homeowners underwater. Credit will not start to flow, as some suggest, simply because the crisis is contained. There have to be borrowers, and there has to be collateral. There won’t be enough.”

The fact is that we take for granted that the only way to create liquidity is to capitalize things through collateralization of assets in our nation’s real economy, and only the financial community can generate this liquidity. Further, no conventional economist ever got past the current system basic, to examine the underlying relationship between the financial community and the consumer-production (real) economy. It’s a marriage made in hell, and there has to be a divorce. And when you pour over the thousands and thousands of public postings on the subject, you can see the same underlying assumption: liquidity can ONLY be generated by the financial community. Even the government has to borrow from them, building an unsustainable national and international debt.

Considering that the currency is backed by the productive capability of the population, there are many type of organization which would be superior to our financial community to take charge of monetization, including expanding the credit unions (depositors’ owned banking), or cooperatives of people in communities.

It is absurd that that the only way to add liquidity to the economic system can only be done through borrowing from the financial community, and when all the existing assets are already monetized, and “there is no more new money,” further monetization (additional liquidity) can only be done through government borrowing. In fact, the most logical method would be to monetize (create liquidity) that is necessary to supportable the productive capacity increase from year to year.

We run our lives and our economy based on available credit (ability of desire of the financial community to lend); and not on what we need and on supporting our human resources with the necessary liquidity to employ everyone who wants to be employed. We buy oil and coal because it’s “cheaper” than solar and other alternative energies, instead of supporting the alternative sources with sufficient liquidity to make it viable. Where’s the money? Is the financial community the God appointed source of it?

The real reason this is not even brought up or challenged as an alternative is because it would radically alter the balance of power between the population and the super-wealthy, and this is something they powerful have not allowed for hundreds (maybe thousands) of years, and they will vigorously oppose it today.

Two possible reasons conventional economists don’t bring it up is either because they’ve not thought outside the economic box they are trained into in college and MBA programs, or they have a vested interest in the status quo.

This idea has been discussed before, but taken off the table on specious basis, while the underlying reason is the protection of the power wielded by the financial community, servants of the super-wealthy.