The Bloodletting

Market turmoil spreads, deepens

© Bryan Zepp Jamieson
http://www.zeppscommentaries.com/Sociology/bloodletting.htm
9/15/08

The Asian Markets are approaching mid day, and the bloodbath that began nearly 24 hours earlier in Europe continues around the globe. Most of the major Asian markets are down by 3% or more. The Heng Seng is off by
over a thousand points.

It will end. As my father in law, a former surgeon, likes to say, “All bleeding eventually stops.” One way or another. They’re either going to run out of panic, or they’re going to run out of investment houses. Of course, between now and one of those two hypotheticals is a long road with some large, not-very-hypothetical bumps in it.

How bad is it? A major party candidate for President in America, where laissez-faire and the free market are considered sacred, said today, “I think it's a failure of government and I think it's a failure of regulatory agencies.” And that was the Republican candidate. Maybe next week Steve Forbes will tell us that control of production should be in the hands of the proletariat. McCain later ran an ad that said, “Tougher rules on Wall Street to protect your life savings. No special interest giveaways.” To prove his point, he stood soundly by the proposition that no public funding should be used to bail out Lehman Brothers, a bold stand in light of the fact that it had been 24 hours since public funding – or money from anywhere – would have not been able to save Lehman, which had filed for bankruptcy. McCain was promising not to feed oats to a dead horse. But for someone who had spend the past 25 years chanting “Deregulate! Deregulate!” it was quite a change. Not that McCain isn’t for change. He changes his mind more often than Lipstick’s husband changes his underwear.

McPander said earlier in the day, “Our economy, I think, still the fundamentals of our economy are strong.” He’s right, you know. Not about the economy being strong. He’s right when he says he really doesn’t know much about the economy.

When that remark was greeted with gales of laughter from all over the political spectrum, he decided there was only one thing to do about that sound economy, and that was to blame the Democrats for it. He said, “I would point out that the Democrats have been in control of Congress for the last two years — both houses, so I think there's plenty of blame to go around.” What Republican policies couldn’t do since 1980, the Democrats did with a slim margin in Congress over 18 months.

Well, that’s the great thing about a candidate like McPander. No matter what your opinion is, he’ll agree with you. Truly a man for all seasons.

Obama has been generally genial and vague, promising to fix the mess, but not offering much in the way of specifics. Anyone who has read any of FDR’s campaign speeches from the 1932 election would recognize the style and tone. He knows the wreck has already happened, He knows that any firm plan he gives now will be meaningless, because he isn’t the President and no matter how good a plan it is, he would simply be accused of grandstanding for political gain. It would play well off the fact that at this time, his role is that of bystander.

Hoover approached FDR about two months after the election, and two months before the inauguration (held, in those days, in March) and offered him a sort of co-presidency position. That way, he could get blamed for things that he didn’t really have any say in. FDR wisely elected to pass on the kind offer, but that long, tortured four months during which Hoover was the lamest of ducks watching the entire economy collapse in ruins led to a constitutional amendment moving the inauguration up to just two months after the election.

It feels like that now. Putsch is a lame duck, not that he ever was any sort of leader, and America and the American economy are adrift, waiting for a new set of hands at the controls. That we don’t know which set of hands that will be just adds to the general sense of uncertainty.

I’m repeating vignettes that I’ve mentioned in prior essays, and I hope regular readers will forgive the repetition, but this is important: The day FDR took office, one third of the nation was famously “ill fed, ill clothed, ill housed” A third of the workforce was out of work.

Industrial production was 1/5th what it was in 1928. Credit had simply ceased to exist. An ongoing cavalcade of bank runs, similar to the bank closures we see now, had eviscerated the entire financial industry. One third of the states were running on scrip, American currency being seen as generally worthless save for the coinage. (And unless you have a lot of pennies, good luck melting coins down for their bullion value these days!).

FDR’s most famous line was, in fact, a well-intentioned lie. We had substantially more to fear than just fear itself. Things were so bad that not only was the wolf at the door, but he wanted OUT.

We’re not at that point now, but we can see it from where we are. Even the movers and shakers, the Alan Greenspans and the Henry Paulsons, are starting to use terms like “crisis” and “panic.”. Greenspan even called
it a once-in-a-hundred-year financial crisis. Presumably hoping that by noticing it, he could get people to forget his major role in helping to bring it about. No lectures about how the free market is self-correcting and can see to its own best interests, Mr. Greenspan?

I was talking to a British friend about it, and remarked that by taking over Fannie Mae and Freddy Mac, the government had effectively nationalized 1/10th of the nation’s economy, taking ownership of the vast mortgage systems. I remarked, tongue in cheek, that perhaps socialism was coming to America. He wrote back, asking if I really thought that might happen. I thought for a minute, and then paraphrased Huey Long: “Sure it will. Only they’ll call it anti-socialism.”

I don’t seriously expect to see socialism in America any time soon – hell, I’ll settle for single payer health and decent worker rights – but I think we have finally reached the end of the era of deregulation and libertarian fools who think that the basest emotions of greed and fear – the two great principles of the market – can produce a happy, just, and moral society. People are beginning to figure out that giving the national wealth to millionaires and asking them to use it to take good care of us works only if it is in the interest of the millionaires to do so. And such a congruent happenstance is, to put it mildly, rare.

But we face rough times, and they are going to get worse. It might last a while. The Great Depression began in earnest in 1931, and lasted until 1936 (the “Depression Era” is reckoned to be 1929 to 1944) and it
doubtlessly felt much longer to those who went through it.

We’ll probably get through this, no matter what we fear and no matter how many banksters save us the trouble and jump off a building ledge. It will end eventually.

All bleeding eventually stops.