Much has happened in the last week. In seven days I’ve seen the beginning of the end, the mother of all deflationary spirals and the shape of things to come. On Monday, the US Congress at first rejected a 700 billion dollar bailout for Wall Street only to pass that very same bill (with an additional 100 billion in pork to sooth the nerves of some rebellious Republicans representatives) four days later. Then on Thursday there was the surreal debate between Sarah Palin and Joe Biden. Surreal as only a debate between two politicians can be, when both are pledging their support for the working class (the hockey moms and the six-pack Joes) while their respective bosses, John McCain and Barack Obama, are doing everything they can to get the bailout (a bill which gives everything to the mega rich and nothing to the common man) passed.
US Treasury Secretary Hank Paulson's new hairdo after the Wall Street bailout
Over the weekend the “Sub-prime” tsunami picked up steam and in Europe leaders of the major economies were meeting to see if they couldn’t forestall the inevitable with a coordinated bailout of some of the continents major financial players. Sarkozy, Brown, Berlusconi and Merkel met in Paris and essentially agreed in a quintessentially European way not to agree on anything. It’s every man for himself in the crash of 2008 and bank nationalizations (the Fortis Bank in the Netherlands) and failures (the colossal Hypo Real Estate company of Germany) are the order of the day. Iceland is on the brink of bankruptcy and has seen its once strong currency plummet against the dollar and the Euro. In Ireland rumors of a run on the nation’s banking system forced the government to declare that it would cover all personal deposits, which it probably wouldn’t have the money to do if everyone did try to get their money out, but something had to be said.
Finally, in an effort to calm the markets before they re-open on Monday, Chancellor Angela Merkel announced with her finance minister that the government would, like Ireland, cover all personal accounts in German banks. In doing this she pledged to insure about 500 billion euros, more or less the amount that the US Congress had refused to hand over to Wall Street on Monday. With Merkel having to make that kind of guarantee it’s no wonder that the objective of the Paris meeting (a coordinated, pan-European bailout plan) came to nothing. The Germans know that the worst is yet to come and have decided to first take care of their own. If the banks in Greece, or Italy, or Spain start to fall, it will be up to their governments to save them if they can.
I could be wrong but I can’t help thinking that the world is about to enter a period of prolonged economic depression. The Banksters have bitten off a bit more than they can chew this time. The high priests of “turbo capitalism” have led us all, willingly or not, to the edge of the cliff and over the precipice. And as any truthful economist will tell you, once all the bubbles have been burst there’s really nothing you can do to stop a system from de-leveraging. No bailout will ever hold and the house of cards built with deceit and the purest strains of capitalist greed must fall.
The world as we know it is about to change and whether we are all eventually governed by corporate dictatorships or finally decide to throw off our chains and live as free men has yet to be seen. The choice is ours.
