The fictive “growth” which was really nothing but the result of asset bubbles peaked and started to be rolled back in 2007. The rout temporarily climaxed in 2008, as trillions in phony wealth disappeared when the hologram machine went dead. This laid bare the true extremism of the “Great Moderation”, really a crazed raging of booms and busts, bubbles and crashes, all this throbbing over the backbeat of an inexorable debt curve trending terrifyingly, impossibly upward since the 1980s. It was impossible to sustain, and nobody meant for it to be sustained. It was just supposed to carry the middle class along while this doomed cohort’s political and economic strongholds were destroyed. The steady degradation of wages and job security, the assault on the unions, the co-opting of pension systems into stock market thralldom, Walmartization and offshoring, and the ”ownership society” propaganda offensive including the systematic demonization of all values other than Social Darwinism; all this combined to reduce the people to a mass of totally dependent and antisocial atoms. It was a comprehensive top-down strategy.
This rendered them incapable of resisting the kleptocracy’s next step. Since the ponzi debt bubble was unsustainable both in itself as well as on account of the physical limits of Peak Oil, the bank rackets and their prostitute government knew the system must crash. I don’t know if they intentionally crashed it at that time it did, but it doesn’t matter. They knew global financialization was (and is) nothing but a monumental ponzi scheme; they knew it would crash, just as they know it will crash again. So all their actions were and are full of intent with regard to the coming, premeditated crash. They intentionally crashed the economy and they’ll intentionally crash it again.
What came next was the ultimate disaster capitalist operation: the Bailout.
It started out gradually with the Fed “facilities” and the creeping oozes of “forbearance” and QE. It had to be stepped up with high-profile bailouts like those of Fannie and Freddie and AIG. Then with considerable fanfare and a propaganda campaign, the TARP was launched. Since then the plan has been to equate the fraudulent TARP with the Bailout itself, although the Bailout has since moved on to other avenues. The system tries to pretend the TARP is just about paid back, at minimal taxpayer cost (though even this is a lie). Meanwhile the main conduits of looting the taxpayer have been free money from the Fed (much of it directly lent back to the government at a higher rate); laundering Bailout loot through the MBS purchases and guarantees of Fannie and Freddie (whose official exposure limits were raised literally to infinity at the end of 2009, rendering quaint TARP inspector Barofsky’s previous exposure estimate of $23.7 trillion), the Fed, and Treasury; and the Too Big to Fail premium.
What has the Bailout cost so far? Including amount of at-risk exposure, TARP inspector Neil Barofsky put it at $23.7 trillion, while Nomi Prins estimated $14.4 trillion. These were both prior to the exposure limits on the GSEs being raised to infinity at the end of 2009. A more recent tally is that of SourceWatch (updated monthly). They didn’t know how to tally the new infinity so seem to have assimilated it to the status quo ante, coming up with a number close to that of Prins, $13.89 trillion.
Those are nominal numbere but don’t represent the real value to the banks. How do we measure how much each dollar stolen is really worth? I’m not sure. One metric that occurred to me is to take the interest Goldman Sachs had to pay Warren Buffett in fall 2008, add to that the Too Big to Fail premium, and prorate all the Bailout trillions according to it. Another possible measure might be how much MBS should really cost according to the market, “the terms private uninsured investors would require” as Yves Smith put it. Or perhaps a combination of metrics, depending on which is most accurate for a particular part of the Bailout.
And today? The government’s political ability to pass TARPs is probably exhausted, while Obama failed in last autumn’s attempt to get dictator power for the Treasury secretary to enact them on his own. But no matter. Today the main Bailout conveyances are free money from the Fed (QE), and MBS purchases at inflated prices by the Fed and Fannie and Freddie. These are intended to both directly convey loot to the banks and to prop up the prices of all the worthless toxic garbage on their truly bankrupt balance sheets. This in turn enables the insolvent banks to engage in accounting fraud (allowed both directly, as when Congress bullies the FASB or when the “supreme” court soon overturns Sarbanes-Oxley, and also indirectly under the rubric of “forbearance”, which is a fancy way of saying the government turns its head while the bank perpetrate fraud) which enables management to massively embezzle on a personal level in the form of “bonuses”.
The other day, after all the fanfare about the (also insolvent) Fed ending its QE and purchase programs, ”Heckuva job Bennie” Bernanke announced that he might expand the Fed’s balance sheet (currently at $2 trillion, an already fearful number) to $5 trillion! That’s the level of support he’s thinking would be necessary to sustain the Bailout. There followed articles wondering if he’s suffering from nervous exhaustion. It wouldn’t be surprising if Bennie’s nerves are cracking. He’s got one huge zombie to keep propped up and ambulating.
The Bailout is now the permanent socioeconomic paradigm in the US and Europe. The new regime is Bailout America. Globalization was the final frontier for one last massive colonial plunder expedition at the summit of the oil age. Now there’s no longer a new plunder frontier over the horizon. All sectors are in decay, and we’re at Peak Oil. There won’t and can’t be any more shifting costs to the outside. Now the gangsters can only terminally cannibalize the inside. Western domestic corporatism was the first level of this assault, and the Bailout is the accelerated and intensified version.
Proximately, the bailouts were supposed to solve an alleged “liquidity crisis” and “get the banks lending again”, which would trickle down to “Main Street”. It was the prospect of this failing to happen which was alleged to make these bank rackets “too big to fail.”
But every word of it was a lie. There was never a liquidity crisis; the banks are just bankrupt. They cannot lend and never intended to lend, and there’s no one to lend to anyway. The massive amounts of taxpayer money being conveyed to them was simply to be hoarded, gambled, and used for monopoly consolidation (M&As).
This is the new order, for as long as the system can be zombified this way. The government simply hands the banks free money through various conveyances. It allows systemic accounting fraud to represent the rackets’ balance sheets as solvent. It even actively abets the fraud with phony “stress tests”. The banks do whatever they want with the handouts. The government even covers some of their gambling “losses” via loan guarantees and other scams. It lets them fraudulently report the returns as “profit”. This in turn allows the banksters themselves to completely loot their own banks on a personal level, in the form of “bonuses”. It doesn’t matter because there’s more government-stolen public money being conveyed in tomorrow.
This is it. Obama, Treasury, the Fed, Congress, and their European counterparts, are fully committed to Bailout America and Bailout Europe. They have no ideas left and no alternative policy which could either keep the financialization tower propped up, or which would be ideologically/kleptocratically acceptable now that they’re fully committed to gangster psychopathy.
This is not and was never intended to be some temporary crisis measure. Just as the Global War on Terror is intended to be the permanent basis of foreign policy and domestic intimidation, so the Bailout is meant to be the permanent basis of US government and economic policy as such. The two combine as the twin vehicles of radical corporatism.
(The so-called domestic economy has become completely intermingled with the Pentagon budget by now. Any large “civilian” corporation you can think of, e.g. in the food or entertainment sectors, is likely to have fat Pentagon contracts.
So the Permanent War itself is a key part of the general corporatist Bailout.)
Wall Street spins from the center of a web of corporate welfare. The government exists only as the threads, along which all the people’s wealth and freedom slide away. Every other racket ramifies out along the lines directed by the finance sector. It’s a command economy which maintains private rent extractions. That’s the economic definition of fascism. So this is in fact “Bailout America” in the same way you might call another fascist regime “fascist Italy” or ”Nazi Germany.”
Meanwhile unemployment goes up with grim implications of permanency, while public spending and programs everywhere are decimated. For good measure we’re insulted and laughed at with taunts like “green shoots” and “recovery”. The truly demented can even spew the atrocious oxymoron, “jobless recovery.”
So we see how every cent of the Bailout was not just a total loss to us, but how that money is being used as a weapon against us, as the feudalists further entrench their position. The big banks have never added social value, only destroyed. From the social point of view, they were not only never Too Big to Fail, they were always too predatory and destructive to be allowed to exist.
The worst delusion of all is that anything could possibly have been better for America than to let the whole parasite sector go down in 2008 while the government (if we the people actually had a government) did whatever was necessary to bolster Main Street through whatever level of hardship we had to endure.
That pain would’ve been far less than that to which we’ve now been doomed since the US was transformed into Bailout America. Now the only possible outcome remains the collapse of the sector, which is just as terminally insolvent as ever. But this inevitable eventual collapse is now bound to be far more painful, far more total, than ever would have been the case if the bubble had been allowed to burst and reality to resume in 2008.
But in the meantime we’ve added the horrors of whatever level of robbery and tyranny the kleptocracy will be able to resort to once the Bailout itself becomes insufficient to keep everything propped up. As the Bailout becomes fiscally and politically impossible to sustain, the system moves on to the next step, direct liquidation of pensions, public amenities, all public property, civil society itself. This is Austerity. (Again, never for the rich and powerful themselves; just for humanity.) I’ll deal with that in Part 3.
This is the infinite crime of all the Bailout leaders, and it remains the insanity and depravity of anyone who still thinks the Bailout was/is “necessary” or “helpful.”
This is the Bailout: A fully rationalized command economy dedicated to maximizing loot extraction from the country by the big banks, under conditions of Peak Oil and debt’s attempt to deflate.
It’s a disaster capitalist adaptation of prior “normal” financialization, which was in turn the form of neoliberal kleptocracy, which was the system’s adaptation to the terminal stagnation of capitalism commencing in the late 1960s.