Economist Dean Baker of the Center for Economic and Policy Research makes the point:
"The near hysterical discussion (count the times '-Great Depression' appears in news stories) of the bailout still largely fails to recognize the roots of the economy's current problems in the collapse of the housing bubble. Much of the discussion assumes that the problem is just bad subprime loans and that house prices will bounce back once the credit markets are working properly."-
The point is critical, because what the Senate and House leaders are telling us, as are President George W. Bush, presidential candidates Barack Obama and John McCain, and Federal Reserve Chairman Ben Bernanke, is that the bailout is to get the American economy moving again.
Credit, they say, is the lifeblood of the economy, and without credit no one can make a move. But credit is the lifeblood of the economy only because people are broke. Purchasing power in the U.S. has collapsed, and it is getting worse as the recession which has now begun worsens.
People can't get loans, not because the credit markets are stalled, but because they have no savings for down payments and can't afford to repay what they wish to borrow.
If they could repay their loans, plenty of credit would be available. But there is no money--and no savings--within the economy for it to get moving again. The only possible source is more federal borrowing to prime the pump Keynesian-style. That is what the politicians claim the bailout will do. But it won't.
Then what is happening?
What is happening is that the Bush administration is engineering a massive raid on the Federal treasury to pay off the people within the financial industry who have been operating the housing scam because the politicians told them to do it. This is hush money. The people in the financial institutions who are getting the money will be passing it on to the big banks that leveraged their criminal lending practices. The giant sucking sound you hear is almost a trillion dollars of future taxpayer earnings going into the vaults of the nations's biggest banks, such as Citibank, Bank of American, and--the pet bank of the Rockefeller family--J.P. Morgan Chase. Much will also go into the vaults of foreign investors such as the Bank of China.
And these banks have no intention of recycling the money into productive U.S. investments. Despite the political posturing, where much of it will go at the second or third tier is into executive salaries and bonuses. The fat cats are "gittin' out while the gittin's good."-
What happens next?
Well, it is already happening. In the post-bubble era there will be no more economic engines for the American economy. A long-term recession and depression are inevitable, and they are expected by those in the know. In fact, there has been a plan in the works for a very long time to bring down the U.S. economy, and it will be happening over the coming months.
This is the plan, so people need to begin to take whatever measures they can to cut their cost of living, get out of debt, and protect themselves and their families.
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