Blowing Bubbles: Part Deux

posted by Curt, on September 25, 2008 12:44 pm

A while ago I posted the following quote from a satirical article in The Onion:

"Every American family deserves a false sense of security," said Chris Reppto, a risk analyst for Citigroup in New York. "Once we have a bubble to provide a fragile foundation, we can begin building pyramid scheme on top of pyramid scheme, and before we know it, the financial situation will return to normal."

Today, with the approval of this bailout bill, we are doing exactly that: we're trying to rebuild the credit economy on top of the collapsing credit bubble. The United States' excessive "prosperity" over the last 30 years has been nothing but a mirage; a mirage created by nearly unfettered access to easy credit. Finally, the credit largess in this country became so unsustainable that, as President Bush noted last night, the credit markets froze.

The credit markets did not freeze because, as President Bush implied, we all panicked. The credit markets are frozen because the money they loaned out isn't getting paid back. These credit markets should be frozen--or the money flowing out of them should be slowed to a trickle from a flood.

The market is trying to tell us something. And it's trying to tell us more than "the housing bubble and deregulation caused all of this mess."

This is the message that the market is trying to send to America: start living within your means now, or you will be forced to.

Our policymakers didn't listen. And you should vote every single one of them that votes for the bailout out of office at the first possible opportunity.

We have now added $700 billion more (at the very least) to the bubble that was already so big that it was too painful for us to let deflate. This money will be nominally borrowed from foreign investors who, for some strange reason, are still determined to finance US debt. But, in reality, the money will be taken, a few cents at a time, from the dollars in your wallet and savings account through inflation. The cost will be tremendous, and it will be born in a disproportionate amount by the prudent and responsible.

filed in Economy and Politics

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