Monday, March 09, 2009

Not Even Close

This morning we get more details of how AIG threatened the Fed with financial Armageddon if we the people didn't fork over another gajillion dollars.

As quoted in Bloomberg:

“What happens to AIG has the potential to trigger a cascading set of further failures which cannot be stopped except by extraordinary means,” said the presentation by New York-based AIG. “Insurance is the oxygen of the free enterprise system. Without the promise of protection against life’s adversities, the fundamentals of capitalism are undermined.”

The only problem is that this is exactly the OPPOSITE of how to maintain the fundamentals of capitalism, where good financial decisions are rewarded, and irresponsible financial decisions have a price to pay. And that's all I'm gonna say about that right now.

NakedCapitalism had a guest post which I liked because, well, it said exactly what I've been saying for a while now.

"The problem isn't falling asset prices, it's not rising foreclosures, it's too much debt."

"At the end of the day, flushing more debt through the system is the only lever policy-makers know how to pull. Lower interest rates, quantitative easing, deficit spending, it's all the same. It's all borrowing against future income. Each time we bump up against recession, we borrow a bit more to keep the economy going. With garden variety recessions, this can work. Everyone wants the good times to continue, so no one demands debts be paid back. Creditors accept more IOUs and economic "growth" continues apace. If it sounds like Bernie Madoff's Ponzi scheme, that's because it is."

Thomas Friedman also just figured out what I've been saying for about 18 months now - that we've had a paradigm shift in our borrowing/consumption model.

Finally, HolyTaco brings some light to our Monday morning with "Recession Friendly College Courses." "Leveraging of big titties for financial success," will surely be the most popular course.


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