Thursday, January 01, 2009

Bailouts are a waste of time...

...and money, and don't address the real problem with the economy, as famed Asian Times economic writer Henry Liu confirms. This is a long article, and I here post for you only the few concluding paragraphs.

Asian Times Online
Killer touch for market capitalism
By Henry C K Liu

...By now, it is becoming clear that government policy has been mostly focused on maintaining asset prices at levels that the market has rejected. Logic suggests that such a policy will result in hyperinflation at the end of the day, which will lead to more bankruptcies down the road in a protracted downward spiral. The government's attempt to save overextended financial institutions may well cause the total destruction of market capitalism. And if past experience is any guide, unless wage income is indexed to inflation, the dilution of asset value through inflation will only hasten the arrival of total market failure and the total meltdown of the market economy.

So far, not much is heard from official circles that suggest the solution to the current credit crisis can only come from an immediate and substantial rise in wage income. Instead of bailing out insolvent financial institutions, the government should use sovereign credit to maintain full employment and boost wage income to catch up with inflated asset prices. If the Fed must print new money to save the system, the new money should go to job creation and wage increases rather than to recapitalize insolvent corporations. Full employment and rising wages will halt the fall of asset prices with a rising floor.

The approach adopted by the Bush administration is not designed to rescue a collapsing global economy from total meltdown but to resurrect free market capitalism from ideological bankruptcy with state capitalism.

Henry C K Liu is chairman of a New York-based private investment group. His website is at

The entire real cause of the current economic mess is the fact that wages have been stagnant since the late 70s and early 80s, when the "globalization" scam began in earnest. Until full-time living wage employment is restored to the majority of adults in this country via relocalized production and sustainable scale farming there will be no "solution" to the crisis. It is simply impossible for people to qualify for loans or have money to spend on non-essentials when their income is 30 years behind the curve.

Any "solution" that only gets people more loans and more debt to pay off and does not address the wage issue is only going to make things worse. As long as the Robber Barons are hoarding the rewards of worker's productivity for themselves and their cronies there is no chance that the workers can continue to shop and engage in business at the same level as their fathers, much less provide for any "growth" in the economy. This should be excruciatingly obvious to everyone, but is somehow being completely ignored both by the powers-that-be and upcoming administration.

And as long as you continue to believe and act and spend your money as if their products and solutions are the only products and solutions, you are simply adding links to your own chain.

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