The new fascism
Hell, I'm just going to copy this from demachina. He goes from state interventionism to fascism ending with a description of how the fathers of this economic crisis are using the crisis to drive more profits to their former companies.
"Brown's picked up a short-term lift on account of how he does look good wearing a dark tie and a solemn expression whilst appearing to save the world from economic catastrophe."
He may or may not have saved the world from "economic catastrophe", that remains to be seen, but he most definitely did rush the world deeper in to state capitalism over night and without much beyond a whimper of dissent. State capitalism is also known as Fascism. Fascism and police states go hand in hand. The two events, the government seizing control of the financial system, and introducing ever greater surveillance are complimentary parts of the same agenda. All of the surveillance measures insures an orderly society, greater productivity, quells disruptive unrest and helps to enhance profitability. Seizing control of the financial system insures an orderly society, greater productivity, quells disruptive unrest and helps to enhance profitability.
Fascism became a dirty world during World War II but its making a comeback with a vengeance today, though most people are just afraid to call a spade a spade, making it so much easier for it to return to acendency since everyone is afraid to says its name, kind of like Voldemort in Harry Potter. It makes people feel better if they tell themselves they still live in free market Democracies. Just as 9/11 and the London and Madrid bombings were used to justify the police state, the financial crisis was used by ruthless politicians to justify a plunge in to state capitalism. Its kind of sad so much was expended in World War II to stop the tide of Fascism for it to just return through the back door 60 years later.
Its especially disturbing how its playing in the U.S. Goldman Sachs Trading Company and its "investment trusts", Shenandoah and Blue Ridge, were one of the original exercises in leverage in the U.S. financial system. Goldman Sachs created this highly leveraged scheme in 1928 during a bubble, right before the great crash. They sold them for $104 dollars a share, and they ended around a $1 a share. They were after that widely reviled to as a Ponzi Scheme shrouded in the legitimacy of Wall Street. Its somewhat ironic that with Goldman Sachs checkered history its CEO, Henry Paulson, was the point man in 2004 in successfully lobbying the SEC to lift leverage limits on the big Wall Street investment banks from 12-1 to 40-1 so they could once again create highly leveraged, Wall Street backed, Ponzi schemes. All the investment banks promptly ran their leverage up to 30-1 or more. It insured the investment banks would collapse at the slightest down turn. Leverage is hugely profitable in an up market because of the multiplier. But it works both ways and the slightest down turn, wipes out the leveraged company's capital reserves in a heart beat as it just did. It was entirely predictable leaving you to wonder either how could they be so incompetent, so ignorant of their own corprate history or what was the ulterior motive.
The crashing of the Ponzi scheme wasn't a problem since Henry Paulson had since become Treasure Secretary, and under the guise of a program that was supposed to buy distressed mortgage backed securities, and unfreeze the credit markets, instead he is handing the entire $250 billion first installment to Goldman Sachs and the rest of the over leveraged banks to undo a problem he while the whole world cheers the largest bank robbery in history. Are the banks going to loan out the money to unfreeze the credit markets... no. Are they going to help distressed home owners with it.... no. Does it get distressed assets off their books.... no. They are going to put it in their vaults to replace the capital that was wiped out due to excessive leverage and for them to draw their leverage back down to something like 15-1, where it was before Paulson's little scheme. He is using a quarter trillion in tax payer money to undo the damage he himself inflicted on the financial system. Only in America and only on Wall Street could a crime of this magnitude be perpetrated to the cheers of the press and policians, and with little more than a whimper from the people.
Another one of these high crimes originates in Robert Rubin another former Goldman Sachs leader. Rubin along with Greenspan championed complete deregulation of credit default swaps, a financial innovation Warren Buffet calls a financial "weapon of mass destruction". Swaps are basically insurance policies companies write to each other to promise to pay off debt if a company goes bankrupt, for which they get a fee, and which allows the buyer to increase their leverage. Probably an OK idea excepting since there is no regulation so there need be no reserves to back the insurance policy. Swaps quickly became another Ponzi schemes which generated huge profits and bonuses for the executives writing the swaps though they had no intent or ability to ever pay them off. They just had to hope no one ever defaulted on their debt and they could keep collecting their fees and putting them in their bonus checks. This scheme apparently reached a new height at AIG. There a small division of 300 people in a company of 100,000 employees raked in 3 billion in bonuses writing swaps, and brought down AIG when Lehman did in fact default on its debt. Once again Paulson just stepped in and pumped $120 billion and counting in to AIG to bail them out from a financial innovation that was destined to cause a collapse. A 1994 congressional budget office analysis of them said exactly that. Its quite likely that Paulson will have to pump tens of billions more in to AIG to pay off all the swaps that are coming due to keep it afloat.