Save the world? Hank just didn't have a clue

The Timesonline ^

[KingJaja]

The Emperor has no clothes. If you want to know why American capitalism is on the brink of disaster, but also want to understand what will save it, then log on to the C-Span congressional website and watch the interrogations of Henry Paulson, the US Treasury Secretary, by the Senate and House banking committees.

Until last week, I was in a minority of one in arguing that Mr Paulson was personally responsible for suddenly turning the painful but manageable credit crunch that had been grinding away 18 months in the background of the US economy into a global catastrophe. Mr Paulson's appearances on Capitol Hill, marked by the characteristic Bush-era combination of arrogance and incompetence, are turning my once-outlandish view into conventional wisdom: Henry Paulson is to finance what Donald Rumsfeld was to military strategy, Dick Cheney to geopolitics and Michael Chertoff to flood defence.

[Carley]

Consider the source.

[trumandogz]

King Henry

“Let Profits be Privatized and Losses be Nationalized.”

[Travis McGee]

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

---Ludwig Von Mises

Paulson and Bernanke are choosing option #2.

[nicola_tesla]

Nothing can be solved until assets are marked to market, housing prices find their historical levels, and these interventions in the market stop.

[pierrem15]

final and total catastrophe of the currency system involved

Since I have two motgages, this option works great for me! And we'll all get to be millionaires!

[Travis McGee]

Yeah, we’ll be rich, just like in Zimbabwe.

[AndyJackson]

as the cross-examination rolled on, and Mr Paulson just waffled - “we will ask experts to advise us”, “we will get the best and brightest financiers to suggest ideas” - the terrible truth dawned. There was no such thing as a Paulson plan. Not only did Mr Paulson not know what he was doing. He did not know what he was talking about. When pressed to offer at least some basic principles for his rescue, Mr Paulson had no answers. When challenged about limits to executive remuneration and taxpayer stakes in future profits of participating banks, he brusquely rejected all such proposals - on the amazing ground that they might discourage some of the stronger banks from taking advantage of government support!

That is what I heard when I listened.

[Travis McGee]

Paulson is just winging it, without a clue. As of one month ago, he said the banking system was strong.

[AndyJackson]

So when do we start getting George Washington’s overprinted with 1,000,000 Democratic Socialist States of America New Dollars and a blodgy inkblot of Hank’s mug, one side only to save on ink.

[Travis McGee]

When China and the rest dump the dollar.

[AndyJackson]

I wonder if folks realize what it will mean to have to live off of the product of our own wealth, less what is taken in capital and interest in repayment of foreign debt.

To monetize and reduce outstanding US$ debt to a reasonable fraction of GDP you would have to print about $200 Trillion or so. How long does that take?

[Travis McGee]

I think in the long run, we’ll pull an Argentina, renege on our debt, and start from ground zero with “New Dollars” in some shape or form.

Of course, this will be on the other side of a depression, war, etc.