Dublin Opinion

William Greider, writing in The Nation, thinks that if Paulson plan for the US Government to buy all of Wall Street’s bad debt is successful it has the potential to bring down one or both political parties in the States. He quotes an analyst who says the plan is “exclusively being lobbied for by precisely those institutions that believed they were ’smarter than the rest of us,’ institutions who need to get those assets off their balance sheet at an inflated value lest they be at risk of large losses or worse.”

Vidal’s phrase ‘socialism for the rich, free enterprise for the poor’ was referred to by Paul Gillespie on Saturday in order to suggest that it is not socialism but something else far more sinister. He quotes Nouriel Roubini, professor of economics at New York University and RGE Monitor as saying:

“Fanatic zealots of any religion are always pests that cause havoc and destruction with their inflexible fanaticism; but they usually don’t run the biggest economy in the world. But these laissez-faire voodoo-economics zealots in charge of the USA have now caused the biggest financial crisis since the Great Depression and the nastiest economic crisis in decades.

“So let them be shamed in public for their hypocrisy and zealotry that has caused so much financial and economic damage. [C]alling it socialism (even socialism for the rich, the well- connected and Wall Street) is giving a bad name even to a failed experiment like socialism; this is more akin to the creation of a corporatist state (like the Italian fascism or the German Third Reich) where private sector interests are protected (gains privatised and losses socialised), where the government is taken over by corrupt and reckless private interests.”

Hugh Green quotes Robert Scheer talking on Democracy Now!

What you’ve got here is really the end of the Reagan Revolution. And I hate to bring up the bad “F” word, but, you know, there is a model for this, and Mussolini had it in Italy, and it’s called “fascism.” It’s where your big corporate interests throw in with government, destroy the freedom of the rest of the people, and preserve their power. Everybody forgets, private corporations and banks did quite well, made out quite well in Italy and Germany in those days, you know? And I am really worried about this assault on our democracy.

Yesterday Albert Sibley, in a piece called ‘Now don’t go slashing your wrists or anything’ quotes Henry Paulson, US Treasury Secretary:

“I hate the fact that we have to do it, but it’s better than the alternative,” Mr. Paulson said on “Fox News Sunday.” “This is a humbling, humbling time for the United States of America.”

Considering the extent of the rip-off that ‘no alternative’ suggestion sounds like a gun being put to their head of the American people. And when all this falls apart I don’t mean figuratively, I mean literarily.

Writing yesterday in the Financial Times Roubini, when describing the dominos that will continue to fall, said: “The real economic side of this financial crisis will be a severe US recession.”

That is, all the things associated with the Wall Street Crash: mass unemployment and potential food shortages, except this time rather than the US Government stepping in and changing the banking system they are going to buy all the bad debt and save the bankers while at the same time eviserating the real economy.

If this brings down one of the political parties, as Greider suggests, then you’re into a one party state system. And that sounds an awful lot like something that we thought was relegated to history.

But surely this is going too far. For a start such a radical turn about would require serious military enforcement.

The 3rd Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq patrolling in full battle rattle, helping restore essential services and escorting supply convoys.
Now they’re training for the same mission — with a twist — at home.

Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.

It is not the first time an active-duty unit has been tapped to help at home. In August 2005, for example, when Hurricane Katrina unleashed hell in Mississippi and Louisiana, several active-duty units were pulled from various posts and mobilized to those areas.

But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.

After 1st BCT finishes its dwell-time mission, expectations are that another, as yet unnamed, active-duty brigade will take over and that the mission will be a permanent one.

…

They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack.
…

The 1st BCT’s soldiers also will learn how to use “the first ever nonlethal package that the Army has fielded,” 1st BCT commander Col. Roger Cloutier said, referring to crowd and traffic control equipment and nonlethal weapons designed to subdue unruly or dangerous individuals without killing them.

“It’s a new modular package of nonlethal capabilities that they’re fielding. They’ve been using pieces of it in Iraq, but this is the first time that these modules were consolidated and this package fielded, and because of this mission we’re undertaking we were the first to get it.”

The package includes equipment to stand up a hasty road block; spike strips for slowing, stopping or controlling traffic; shields and batons; and, beanbag bullets.

“I was the first guy in the brigade to get Tasered,” said Cloutier, describing the experience as “your worst muscle cramp ever — times 10 throughout your whole body.

“I’m not a small guy, I weigh 230 pounds … it put me on my knees in seconds.”

The link is from Arthur again, and you should read all of his post, ‘No, you’re not crazy’, just in case you think I am for pedaling some anti-American clap-trap. As has been noted before, this is a global crisis.

Roubini illustrates how it has the potential to spill over into Europe:

Financial contagion, the strong euro, falling US imports, the bursting of European housing bubbles, high oil prices and a hawkish European Central Bank will lead to a recession in the eurozone, the UK and most advanced economies.

European financial institutions are at risk of sharp losses because of the toxic US securitised products sold to them; the massive increase in leverage following aggressive risk-taking and domestic securitisation; a severe liquidity crunch exacerbated by a dollar shortage and a credit crunch; the bursting of domestic housing bubbles; household and corporate defaults in the recession; losses hidden by regulatory forbearance; the exposure of Swedish, Austrian and Italian banks to the Baltic states, Iceland and southern Europe where housing and credit bubbles financed in foreign currency are leading to hard landings.

Thus the financial crisis of the century will also envelop European financial institutions.

The Irish banking system, we are assured, is safe. Brian Lenihan has tried to calm depositors fears by saying the Government will underwrite their savings and the Financial Regulator argues that Irish banks have access to the liquidly of the ECB and are well regulated.

Oh if it were only so simple. As Ciarán O’Kelly argues today on Irish Left Review, Irish banks are in trouble as it is:

Ireland’s property development business model has proven very dangerous for the banks. They’ve been caught short in two directions. First, they lent to the developer who was essentially selling off the plans (or as good as), in the certainty of a quick return. Second, they’ve been busily lending increasing amounts to mortgage payers in the knowledge that they could repackage the risks from those high-stakes several-multiples-of-income 100% mortgages and sell it on the credit default swaps (CDS) markets. But these have all gone down the hole. Banks can’t lend on wholesale markets so they can’t borrow to feed the mortgage frenzy. And they can’t offset their risky bets. AND the property developers have no customers so can’t repay their loans. AND the risky mortgage-payers are going to default.

Indeed, they are so deeply in it that there is only one option left: a huge dig out. If that were to happen though there is no way we should accept a Bush/Paulson style bail out of Irish banking. Unless, of course, Brian Cowen is planning to bring in the Army.