Sunday, September 21, 2008

In crisis, a member of Project Mayhem has a name

This morning, Secretary of the Treasurey Henry Paulson was on This Week with George Stephanopolus (sp?) (as well as Meet the Press, and apparently Fox "News" Sunday), and pissed me off. By now, you've probably heard the explanation of how this crisis happened, but it's important to understanding my ire, so I'll summarize it here:
  • Banks gave loans to people they knew could not pay back the loans.
  • Various banks and other investment firms traded these loans around, selling them as if they were actually worth something, and even using them as collateral for other investments.
  • They weren't, people couldn't pay, the money evaporated.
  • Chaos ensued.
Now the US government is buying a chunk of these "assets" to put actual money into the system, instead of the imaginary money. It's going to cost us $700 billion (more than we've spent so far on the Iraq War, for example), but it looks like it's necessary, so fine.

But now, with a straight face, Hank Paulson is saying on This Week, that we shouldn't count that whole $700 billion as the real cost of this, because we're buying assets, people, which we can then later sell! See, no problem. Sure, they're assets that are so worthless that they could, say, cause our entire economic system to very nearly collapse, but we, the American people, will now own them!!

Don't you feel better now?


Jeffrey D. said...

But here's what I don't get. Are we buying the "assets" with real money? Where is that money coming from, when we're already in debt up to our ears? It's imaginary money, right? Credit money. So basically we're exchanging a bunch of air and saying, "poof! Now the government is in charge of the free market." Right?

Jon the Geek said...

There's real money in the chain... unfortunately. Our debt isn't imaginary money; we borrow it from other, friendly countries... like China and Saudi Arabia. Doesn't that make you feel better???