Bailout of America Started Years Ago, But it Could Fall Bankrupt By Its Own Rules
US economy, international economy November 28th, 2008
Unlike some Bloomberg commentators have implied when they said that “we’re all in this mess together,” (ie., if the US goes bankrupt, it’s not just the US’s problem) the rest of the world should not be held accountable for what were originally US administration accounting problems and US I-banking greed which caused the original off-balance-sheet recordings and lack of accounting transparency.
Enron? This is basically Enron Redux, but over most of the US financial industry.
Fact 1: American consumers didn’t save any money (there has been a negative overall savings rate for years).
Fact 2: The Bush administration “printed” TRILLIONS of dollars it didn’t have so that it could finance its illegal war in Iraq.
Fact 3: Top US Banking companies slid items off their balance sheets onto “hidden” balance sheets in order to get around accounting rules and hopefully earn some more money by doing it (read David Smick’s The World Is Curved for these details - Smick knows it inside and out).
Fact 4: American consumers bought into the easy and cheap money - consumers can be held responsible, too, for making poor financial decisions. Taking on extra mortgages, or even a first mortgage when one cannot afford it. The culture of materialist greed needs to come to an end sometime.
Fact 5: The US Fed was already in great debt and deficit before this whole mess started, and was already looking ahead to the greater demographic problems coming up as a result of overpromises and underpayments in Social Security and Medicare.
How much of this is the rest of the world’s problem? The rest of the world bought US Treasuries and stored US dollars as reserve currency (a sweet deal which some speculate Iran has been punished for trying to get out of). Since oil is traded in dollars, one can’t totally hold other countries responsible, since they have no choice if they want to buy oil.
People scoff at all the bailouts, but you know what? The rest of the world has been bailing America out for decades by buying US Treasuries for their central banks because they had to because the greenback is the reserve currency. This is how the US prints money: “virtually” by issuing new debt.
Return to the debates about whether the auto industry should get a bailout… is America like the US auto industry? Does anyone really want to buy GM cars anymore?













