There must be a painful price, or no lesson will be learned.

The recent convulsions in the financial markets have been on the radar for a long, long time – for anyone who was paying any degree of attention and who had two brain cells to rub together. The pages of the more “esoteric” financial magazines, the pages of the better blogs (think about how long Atrios has been talking about "the big shitpile or the diaries and front-page posts on Daily Kos) have all been talking about this impending collapse for more than 8 months.

As long ago as last July, a friend of mine in the financial world made a sarcastic quip: “in the financial world, flat is the new up,” meaning if you could just hold your own, you were doing better than most.

The collapse of Long Term Capital Management in the late 1990’s was one of the harbingers of what has now become nearly routine practice on Wall Street. Some bright young hard-charging economic number cruncher comes up with a new “financial instrument” based on predicted rates of change, margins, and the assumed divergences between stocks, bonds, T-Bills, real estate, and the price of tulips on the Amsterdam bourse. Said bright young fellow (usually they’re male, because a lot of men are pretty dumb like that) then receives a Nobel Prize in economics and gets hired by everyone from Solomon Brothers to Shearson-Lehmann.

That financial instrument is a complicated jumble of past performances, funny little curves, second and third derivatives of those curves, integrated fourier functions showing the power-spectral signal of Cacao market fluctuations in Ghana as related to the average cost of 2nd mortgages in Finland over the last 600 years (amortized in 1993 pesos)… or some such absolute fucking garbage.

That jumble of nonsense is coded into a fast computer, and VOILA!!! The underpants gnomes spring to action and massive, permanent, untold profits ensue forever and ever… until they don’t.

Financial crashes based on speculative stupidity are, sorry to say it, part and parcel of the Capitalist Market System. I mentioned Tulips up above… that was a LONG time ago. There is a huge, long list of financial market crashes based on devaluation of currency, overextension of credit to bad risk debtors, speculation and wild insanity regarding the latest greatest surefire profit-maker.

The Savings and Loan Crisis (THANKS John McCain) under Bush Pére (some coincidences are just... well... not) cost the US taxpaying public about 500 or so billion dollars, and the people who made it all happen got away with little or no punishment (Neal Bush, John McCain, and more). LTCM collapsed, and was promptly bailed out to the tune of 3.6 billion in a move organized by the Federal Reserve Bank (LTCM Crisis Wiki). Some of the creditors cajoled into feeding on the carcass of yet another bright young fellow’s idea include many that are now defunct (Lehmann, Merrill Lynch, and more). Funny how that works.

Now we’re gearing up for the “mother of all bailouts” – at LEAST 700,000,000,000 dollars worth of bad paper to be purchased using government funds (i.e. the Peoples’ money). Said purchases to be overseen and determined by the Secretary of the Treasury: “Handout” Hank Paulson. He will have NO oversight, will not be answerable to ANY elected lawmaker, his decisions are final and uncontestable, and he can bail out anyone he wants. I have seen hints that the purchasing power given to him is 700 billion at any one time, meaning that if he buys 700 billion worth of toilet paper (masquerading as a tranche of mortgages) and sells it for 300 billion, he can then use the 300 billion to buy more. HURRAH!

Handout Hank is “open” to discussing some mortgage relief, but won’t even HEAR of his buddies’ golden parachutes getting deflated in any way, no SIR!

Hell, no, Hank. (Can I call you Hank?).

See the thing about training pets, raising children, reforming addicts, rehabitating criminals… (that last one really applies best, I think)… is that if there is no clear painful outcome for the continued misbehavior (rub the puppies’ noses in it, yes?) then the misbehavior will continue unabated.

This is the third or fourth time in the last 2 decades that the captains of industry and the financial mavens have screwed the pooch to the tune of billions of dollars. Each and every time, the government that these same über-capitalist movers and shakers have spent so much time blaming for all the ills in the world, is begged to come rescue them, bail them out, foot the bill, take the hit, and so forth.

All with OUR money.

700,000,000,000 dollars. That is awfully close to 1,000,000,000,000 dollars. A trillion dollars of taxpayer money used to buy bad paper from the so-called geniuses who devised these stupid “instruments” in the first place. These assholes want their golden parachutes preserved, they want their million-dollar salaries, and they want their high-flying lifestyles. They want to get picked to be Treasury Secretary or Chairman of the Federal Reserve, they want to talk about “market distortions introduced by over-interference by government forces”… they want to talk about privatizing this and that and the other…

But when they get in trouble, oh my oh dear oh help… who do they turn to?

I say no. I say that we, the people, are already in a world of economic hurt, and we can take the hurt and take the pain. If there is 700 BILLION dollars in extra government money laying around, I say we invest that money in things that REALLY matter… like schools, like trains, like alternative energy, like single payer health care.

In fact, if we are going to nationalize the banks, we might as well get out of the whole capital markets thing while the getting is good, turn over all that capital to working for people that need it more.

It really strikes me as funny that the biggest government bailouts in US history, the longest strides toward outright government ownership of massive chunks of the capital markets, have all taken place under Republican administrations in the last 2 decades.

Seems to me that the lunatic libertarian fringe needs a quick reality check, because when I hear them say “Capitalism is the only way that works, and it must be free from government interference, so deregulate and privatize everything now!!” and then I look at what is happening now, and what has happened in the last 25 years… I just shake my head and think “Capitalism for the poor and Socialism for the rich, same as it ever was”…

But enough. There must be a punishment, and a very painful one. Banks must fail, funds must go bankrupt. Those who chose to invest in bad paper, who chose the gimmicky, quick and easy get-rich now schemes to invest their (and their backers’) money, who valued to easy money over the intelligent choice… sorry, but you lose.

Fail.

Get a different job.

Evolution demands that organisms adapt or go extinct. Time to face the music, take your medicine, and get off the government dole all you big, fancy banker types. In fact, maybe we need to nationalize your house, car, and retirement fund in order to help pay for the colossal debt you helped create.

Have a really bad day, capitalist pigs.

Love,

Red Dan