Thomas Galvin
Purveyor of Fine Pulp Fiction

Triquetra
Remember: if you see something, say nothing, and drink to forget. -Welcome to Night Vale

This Week on the Web brings you the last Vampire Diaries recaps until fall, Thor news, the annual Fox Television Bloodbath, the end of the world, and more!

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This Week on the Web brings you the latest Thor and Transformers trailers, and new Google tablet, that damn autocorrect, more people getting trampled in an effort to get cheap crap from Wal Mart, the impending collapse of America, and more!

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This Week on the Web brings you prototype Iron Man armor (kinda), The Green Lantern trailer, Koalas (they some little bitches), Apple joining the OpenJDK project, airport security, and more!

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This Week on the Web brings you “real” vampires burning copies of Twilight, first pics of the Green Lanter’s power battery, ten ways to kill someone real good, The Rent is Too Damn High Guy, an interview about why Steve Jobs is so great, an article on why Steve Jobs can go straight to hell, and more!

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This week on the web brings you a whole bunch of creepy Facebook news, Amish Vampire Romance, superheros, an imprecatory music video, a chance to kick a deceased loved one out of heaven, and more!

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From this New York Times article:

The chairman of the Securities and Exchange Commission, a longtime proponent of deregulation, acknowledged on Friday that failures in a voluntary supervision program for Wall Street’s largest investment banks had contributed to the global financial crisis, and he abruptly shut the program down.

“Voluntary supervision.” That translates to “promise to be good, and we’ll ignore whatever you do. And allow the economy to collapse.” At least they’re starting to realize that this was a huge, terrible, awful mistake.

$700,000,000,000.

Holy crap, that number is so big I don’t even know how to pronounce it. My brain shuts off somewhere after the 8th ‘0’. I think it’s some kind of a defense mechanism. I’m just going to call it a scamtillion. Henry Paulson is asking the United States Congress to give him seven scamtillion dollars.

Okay, so I did some Googling, and it turns out that this number is seven hundred billion dollars. Seven. Hundred. Billion. He claims that this money must be given to him immediately, or the entire US economy will collapse.

What does he plan to do with that money? Here’s a helpful guide to Treasury Secretary Henry Paulson’s plan. No, wait, I’m sorry, that’s the entire plan itself. This guy wants the Congress to give him seven hundred billion dollars, by the end of the week, and his entire proposal, the thing he wants passed into law, is three pages long.

This is one of my favorite parts:

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

This is not a blank check, no sir! We require a paltry seven hundred billion dollars in order to fix the mess that we helped create!

But the best – the absolute best – section is right here:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Go back and read that again, slowly.

“What I do with this money, what I, Henry Paulson, do with seven hundred billion dollars of the taxpayer’s money, cannot be reviewed by Congress, cannot be reviewed by any investigative or regulatory agency, and cannot be reviewed by a court of law. You just have to trust me.

He is asking for a hundred billion dollar check, and free reign to do with it as he will. His actions, should this “bill” pass, would be unreviewable, by law. If he decided that the best way to fix the economy would be to blow it on hookers and coke, that decision could not be questioned, by law.

But let’s take a more realistic scenario. Let’s say Paulson decides that the best way to fix the economy is to give a whole lot of money to some personal friends on Wall Street. Yeah, the other firms might get a share, but the focus of the relief would be on those firms owned by Paulson’s friends. If that’s what Paulson decided, there would be nothing anybody could do about it, by law.

Or, let’s say some lower-level bureaucrat decides to do something similar. Whatever portion of the seven hundred billion dollars this hypothetical individual is given charge of gets diverted to his friends. Again, there is nothing anybody can do.

Henry Paulson is asking for seven hundred billion dollars, and no accountability. There is no way, no possible way, that something like that can happen in a democracy. The two concepts are antithetical.

Look, folks. The people that got us into this mess are probably not the best people to get us out of it. And I know for sure that the best idea is not to give one man seven hundred billion dollars and look the other way.

I think this sums things up nicely:

Ian Welsh’s recent article Simple Solutions For America #1: Fixing the Mortgage Market makes strong case for how the Government should handle to mortgage meltdown: instead of accepting these junk mortgages as collateral for loans, as the Fed is now doing, Welsh contends that it would be better for the Fed to actually purchase these mortgages outright, at a “fair market value’ (e.g. the mortgages’ price in 2001, before the bubble), and work with the borrowers to establish a fair, workable repayment plan.

The benefits to this plan:

  • Mortgages, which are not essentially worthless, would have value again. This is imoprtant, since the US economy follows the mortgage economy very closely.
  • The government would actually make a long-term profit, instead of simply throwing billions of dollars of taxpayers’ money at people who offered and accepted bad loans.
  • The people responsible for this mess would lose money, which is a principle of the free market, and would discourage these kinds of shenanigans in the future.

After a cursory glance at this plan, I don’t see any glaring problems. Thoughts?

The original title of this post was going to be Cut The Interest Rate All You Want, It Isn’t Going To Fix Anything, And In Fact It’s Going To Make It Worse, And Anyone That Believes Otherwise Should Be Kicked In The Sensitive Parts In Order To Prevent The Possibility Of Their Ignorance Spreading Via Biological Reproduction, but it lacked a certain… elegance.

Look, this is a very simple thing. The problem in our economy right now is that too many people took out loans they could not afford. There is no possible set of circumstances under which the correct answer to this problem is “make it easier to borrow money.” It simply makes no sort of sense, not even the sort of sense you think you make when you’ve had too much to drink and you drunk-dial your accountant at 3 in the morning and tell him to buy mangos, because their futures are going up, man.

A debt crisis cannot be solved by more debt.

For the love of all things logical, a debt crisis cannot be solved by more debt.

Does anyone know the HTML syntax to make something even more emphasized? Because I don’t think I’m adequately conveying the degree to which a debt crisis cannot be solved by more debt.

Ahem.

Anyway, allow me to explain how this whole lending thing works.

Say a bank borrows a thousand dollars from the Fed. This is real money, hard currency.

The bank then lends that money out to Some Guy, who uses it to buy a widget. A really nice widget. The maker of the widget now deposits that thousand dollars in the bank.

The bank now has a thousand dollars of Widget Co.’s money on its books, and an IOU for a thousand dollars from Some Guy. But the bank doesn’t stop there: it lends out Widget Co.’s money to Some Other Guy. This is what banks do, and it’s why they can pay us interest in our deposits.

By law, a bank has to keep some cash on hand in case a depositor comes asking for it, so let’s say it keeps a hundred dollars on hand, and lends nine hundred to Some Other Guy. Some Other Guy buys another widget. A slightly less-nice widget. The maker of the widget now deposits that nine-hundred dollars in the bank.

The bank now has $1,900 of Widget Co.’s money on its books, as well as an IOU for $1,000 from Some Guy, and an IOU for $900 from Some Other Guy. There is now $1,900 dollars in the economy, even though there was only $1,000 “real” dollars to start with. Lending multiplies money.

It is designed to work this way. It is one of the ways our economy grows. But things start to fall apart when people can’t repay their debts.

Let’s say Some Guy can’t afford to pay his $1,000 loan back. The bank now has $1,900 of Widget Co.’s money on its books, as well as an IOU for $900 from Some Other Guy… but the $1,000 it was supposed to get from Some Guy has essentially vanished. It owes $1,000 to Widget Co. that it cannot repay, plus $1,000 to the Fed, which it also cannot repay. The economy has shrunk, and that money is gone. It has to eat that loss, and if it cannot, the bank will go bankrupt. If Widget Co.’s deposit is not insured, it, too, may go bankrupt.

That is essentially what is happening in our economy today. The various financial organizations have been left holding stacks of worthless paper – mortgages – that contain empty promises of repayment. The collateral that backed these mortgages – the properties themselves – are falling rapidly in value, which means that selling them won’t make up the difference. The money that was theoretically represented by those pieces of paper has simply disappeared from the economy, vanished. Trillions of dollars are simply gone, burned up like chaff.

The answer to this problem is, essentially, to be more careful about who we lend money to, and probably some sort of massive bailout from the Fed. As much as I loathe that last part, I don’t think our economy can suffer the alternative.

But I know for darn skippy that the answer to this problem is not to cut the interest rate and let even more people borrow money for stuff they don’t need and can’t afford.

Buy my books!

The Janus Project

Available for pre-order from Amazon, and releasing Sept 30.

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The Vampires of St. Troy

Debutante

Available in eBook and paperback.

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Sire

Available in eBook and paperback.

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Scion

Available in eBook and paperback.

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