Socialism and the End of the American Dream

“Basically what happens is that after a period of time, economies go through a long-term debt cycle -- a dynamic that is self-reinforcing, in which people finance their spending by borrowing and debts rise relative to incomes and, more accurately, debt-service payments rise relative to incomes. At cycle peaks, assets are bought on leverage at high-enough prices that the cash flows they produce aren't adequate to service the debt. The incomes aren't adequate to service the debt. Then begins the reversal process, and that becomes self-reinforcing, too. In the simplest sense, the country reaches the point when it needs a debt restructuring. We will go through a giant debt-restructuring, because we either have to bring debt-service payments down so they are low relative to incomes -- the cash flows that are being produced to service them -- or we are going to have to raise incomes by printing a lot of money.

This is so manifestly false that we doubt Mr. Obama really believes it. He has to know that it matters what the government spends the money on, as well as how it is financed. A dollar doled out in jobless benefits may well be spent by the worker who receives it. That $1 of spending will count as economic activity and add to GDP. But that same dollar can't be conjured out of thin air. The government has to take that dollar away from someone else -- either in higher taxes, or by issuing new debt in the form of a bond. The person who is taxed or buys the bond will have $1 less to spend. If the beneficiary of that $1 spends it on something less productive than the taxed American or the lender would have, then the net impact on growth will be negative.

Bill Moyers was quick to lend Hamas legitimacy as a "resistance" movement, together with honorary membership in PBS's imaginary "cycle of violence." In his Jan. 9 TV show, Mr. Moyers explained to his viewers that "each [side] greases the cycle of violence, as one man's terrorism becomes another's resistance to oppression." He then stated -- without blushing -- that for readers of the Hebrew Bible "God-soaked violence became genetically coded." The "cycle of violence" platitude allows analysts to empower terror with the guise of reciprocity, and, amazingly, indict terror's victims for violence as immutable as DNA.

It's impossible to know what kind of history Mr. Obama has been reading but this much at least is true -- the generation he describes knew the importance of sturdy alliances all right. There was that one, for instance, between the American leader, Franklin Roosevelt, and the British, Winston Churchill. Both of them, along with their countrymen, were driven by one enduring conviction -- that fascism should be eradicated from the face of the earth and a total war of destruction waged on Imperial Japan and Nazi Germany until their surrender. It would be hard to find, in their pursuit of that purpose, any hint of that tempering quality of humility and restraint. Not that it isn't entertaining to imagine Roosevelt extending the hand of friendship and conciliation to Hirohito, or Churchill proposing to raise a glass and talk things over with Hitler.

political constituency whose chief enterprise has been these many years to portray the war on terror as an illicit enterprise, conducted by agents of government bent on robbing innocent Americans of their constitutional rights and instilling baseless fears -- and that has succeeded, with the invaluable aid of a like-minded quarter of the media, in presenting a picture of Guantanamo as a hell on earth akin to Auschwitz.

The one reservation that slightly dampens the euphoria of Obama groupies is the thought that now, with a massive recession under way, is a most inopportune time to come into office. Nothing could be further from the truth. From Obama's viewpoint, this is a preternaturally opportune moment, an unhoped-for conjunction of circumstances that uniquely enables him to implement a programme that would otherwise have been unthinkable.

a debt-equity swap

LIF said: Jan. 19, 3:17 PM MY PLAN 1. Mandate a 12-1 leverage cap for all financial institutions to take effect within 180 days. This 12-1 leverage cap has to be calculated using real market prices, not mark-to-model prices. 2. Temporary ban on capital raising by banks – water can’t dilute poison. You eliminate the poison first then add more water. 3. Force banks, etc to reach this 12-1 leverage cap by selling their toxic assets within 180 days via a US Govt Auction. The US Govt will be the Auctioneer but will NOT bid for assets 4. Any bank that is unable to sell sufficient assets to bring it under the 12-1 leverage cap will automatically nationalized by the US Govt at a price of $1. All shareholdrers and bond holders forfeit their assets. This will provide an incentive to the banks/financial institutions to sell these assets. 5. The US Govt will now hold all the toxic assets to maturity - this will prevent private market bidders from low-bidding in (3) above. Private market bidders in essence are being told, you buy the assets during the auction or you will not have another opportunity to buy the assets, as the US Govt will sieze them at an effective rate of ZERO and then hold them to maturity. 6. Any bank that falls under nationalization will also have its CEO, Board of Directors and members of the Management committee for the past 5-10 years disgorge all compensation earned during the past 5-10 years. 7. Create standardized CDS products that traded on an electronic exchange. All non-standard CDS products should be liquidated in the OTC market or swapped into standardized CDS products prior to the commencement of the new CDS exchange. The exchange will commence within180 days. 8. New Mortgage Financing Rules: 20-30% minimum govt mandated down payments. Strict Debt to Income limits, etc. These rules must be codified into federal law. 9. New Credit Card/Auto Finance rules: strict rules on the amount of credit card/Auto finance debt available to consumers.