Ethel the Blog

Mark Ames shows a fun graph (that I’m too lazy to download and then upload so just go to Exiled to see it) about incarcerated Americans that shows a remarkable change in slope in 1980.  You know, when the Reagan Revolution and its attendant Holy and Forever War on Drugs began.  Ames comments:

I’ve heard from more than a few people who get all hot under the collar when I say that the whole class war against America started under Reagan. This graph pretty much says it all: it was Reagan who saw to it that America defeated China, Russia and all the other repressive regimes… to make us the world’s number one Gulag Nation. Why did he lock up so many Americans, and keep them there? Put it this way: how can you get away with looting the middle-class and working-class wealth without an uprising? How can you keep people down when you arrange it so that the CEOs’ pay goes from 30 times their workers’ salary when Reagan took over, to over 500 times their salaries? Here’s how you make sure they shut up or else.

The really entertaining, bitter and vicious Marxist stuff, though, is in the comments section, starting with Baltimoron:

Mark, what do you suggest “working class” Amerikans do to improve their collective situation? Elect Democrats? Protest in the streets? Rise up and seize the means of production?

The first option is the typical answer given by Amerikan liberals, but those of us who remember the Clinton years and pay attention to current events know that the Dems are just as in the pocket of big business as the Repugs. The left wing of the capitalist class is still the capitalist class. Note that Obama is staying the course when it comes bank bailouts and that Geithner’s strategy to avoid nationalization is to create a (supposedly public/private) “bad bank” to buy toxic assets from financial institutions–effectively socializing loss while allowing profit to keep on flowing uphill. And anyway, the watered-down Keynesianism the Dems are adopting will never overcome the inexorable tendency of monopoly capital to stagnate and the inevitable response of financialization, debt, and bubble dependence. Scratch the voting Democrat option off of your class war counteroffensive tactics list.

So what about protest? … See that ellipsis? That was me backing away from the desk to enjoy a hearty belly laugh. Ruling cliques have long histories of ignoring peaceful protest movements that don’t serve their class interests and using violent protest actions as convenient justifications for increased policing. The whole protest scene is little more than an excuse for middle class crackers to indulge in lookame bullshit and score the sort of trim that thinks being easy is a sign of “empowerment.” It’s probably better than spending your late adolescence/early adulthood playing Xbox, but it sure as Hell isn’t going to affect any meaningful political change.

And the third option: proletarian revolution. Fuck yeah. Blood in the streets, bourgeois politicians subjected to mass revolutionary tribunals, workers’ councils running the factories, bankers sent down to the countryside to learn from Mexican peasants… Sweet. Only problem is that the Amerikan proletariat has been evaporating since WWII. By now, our “working class” has been so thoroughly bourgeoisified via accepting the parasitic bribe of high pay (on a global scale) for non-productive employment that it is inaccurate to speak of the independent class interests of the Amerikan worker. During the Great Depression the threat of a general strike and the creation of dual power via the seizing of factories and workshops was very real. That’s not the case today. There are few factories left in these United Snakes producing the necessities of life and therefore no base for revolutionary power. What you call a “class war,” Mark, is really just the head of a unified parasite managing its corpulent body. If less rich Amerikans rise up against obscenely rich Amerikans the former will effectively destroy their meal ticket. Too bad, so sad left wing Amerikans; the endgame of class politics in this country was played out decades ago and you were all too busy voting Democrat, selling your souls for real estate and cocaine, or experimenting with anal sex as insurgent pleasure.

So what’s your solution, Mark? How is the “class war” counteroffensive going to solve the problems of monopoly capital stagnation, the rigged nature of financial democratic politics, and the parasitic economic profile of the Amerikan “working class?”

Followed by wengler:

The ILWU is not a pussy union. If the longshoremen were to sit or walk out and strike tomorrow, a large amount of this country’s lifeblood, aka cheap Asian crap, would sit in this nation’s harbors and ports. The rich elite have bet their future on Asian slave labor and amassed a mound of debt by loaning to Americans who wanted it. Now is the time to change the game.

First of all, this trillion dollar bad bank needs to go down in flames. The taxpayer has to subsidize rich private capital once again so they pick up the trash they created? I don’t think so. Obama has clearly chosen his rich friends and failure over doing what is right. I can’t say that I am not disappointed. I honestly thought he was smarter than that. Oh well.

Second there must some sort of general strike against debt payment. Especially credit card debt. Congress must reverse their odious credit card lobbyist written bankruptcy bill or face the fact that people are not going to pay anything.

Third there has to be a permanent jobs program in place to get the country to full employment. Private industry would rather pay welfare than have a full employment economy, because suddenly Wal-Mart would have to actually compete for jobs, especially at the lower end. Arguments against full employment are plentiful, but none make much sense compared to the slavery conditions imposed by the vaunted “public-private partnerships” after welfare reform.

And finally outlaw the words “public-private partnerships” as well as deeds such as community-killing corporate welfare and all subsidies for the rich. At the end they should be at our feet thanking us for sparing them and begging us to redistribute all their ill-gotten gains.

And finally sansculotte:

Reagan only hammered the nails in the coffin of the American working class. The sad fact is that the unions cut their own throats in the post-WWII period. They opted for higher wages, paid vacations, pensions and benefits packages so they could buy shiny fast cars, new homes in the suburbs and send their kids to college so they wouldn’t have to be working class. They opted for this instead of fighting to gain control of the means of production and the power to determine the course of their own lives. In other words, they opted to be serfs. Comfortable, well paid serfs with lots of fancy gadgets and nice green lawns, but serfs just the same. The capitalists were only too pleased to give them this. Some of them grumbled about socialism and other John Birch shit, but the truth is they couldn’t have been more pleased, because the alternative–relinquishing power and control was one thing they weren’t going to give up. But now, as you point out, the working class is hopelessly bourgeois and reactionary, unless things continue to tank. I see cause for optimism in the economy getting worse, it will cause millions of people to finally wake up to reality. And if it’s too late to change anything, we can at least get even.

In the way of bumper stickers, I’m leaning towards either “Start a Revolution and Get Laid” or “Start a Revolution and Defenestrate the Oppressors”. I suspect the gen-x,y,z crowd will prefer the former.

Normally a story wherein corporate predators destroy other corporate predators would only make me wish there was some way to make the destruction mutual.  In this case, however, the damage - at least $500 billion - was spread around to those not directory involved.  On the other hand, the spike may have encouraged slightly more rational behavior on the part of the owners of Ford Titanics and Chevy Lusitanias, although better things could have been done with $500 billion than pissing it away in the casinos of War Street.

When oil prices spiked last summer to $147 a barrel, the biggest corporate casualty was oil pipeline giant Semgroup Holdings, a $14 billion (sales) private firm in Tulsa, Okla. It had racked up $2.4 billion in trading losses betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20% of the nation’s crude oil inventories. With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.

But now some of the people involved in cleaning up the financial mess are suggesting that Semgroup’s collapse was more than just bad judgment and worse timing. There is evidence of a malevolent hand at work: oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup’s accounts.

“What transpired at Semgroup was no less than a $500 billion fraud on the people of the world,” says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.

What’s the evidence of this? Much is circumstantial. Proving oil-trading manipulation is difficult. But numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup’s trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring. “Nothing’s been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze,” says John Tucker, who is representing Kivisto.

What’s known for sure is that Goldman Sachs, through J. Aron & Co., its commodities trading arm, was in prime position to use such data–and profited handsomely from Semgroup’s fall. J. Aron was Semgroup’s biggest counterparty, trading both physical oil flowing through pipelines and paper oil, in the form of options and futures.

When crude oil peaked in July, Semgroup ran out of cash to meet margin requirements on options contracts it had with Aron, contracts on which it had paper losses of $350 million. Desperate to survive, Semgroup asked Aron to pony up $430 million it owed on physical oil. Aron said no, declared Semgroup in default on its contracts and demanded immediate payment of losses.

Some answers may emerge in late March when former FBI director Louis Freeh releases a report on the trading surrounding Semgroup’s demise. He was hired by Semgroup and given subpoena power by the bankruptcy court judge in Delaware. Meanwhile the Securities & Exchange Commission is investigating, and lawyers involved in the bankruptcy say that Manhattan District Attorney Robert Morgenthau’s office is looking into the actions of New York firms in the collapse. His office declines to comment.

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Catherine Austin Fitts is puzzled about the recent seizure of the largest credit union clearinghouse by regulators.  Are the bankers jealous and getting their revenge, or is this just another house of cards about to collapse?

Credit unions have provided a serious alternative to banking with big banks. Their strength in their communities commands a market share that the big banks want. So this news is ominous. Given what I know about credit unions around the country, the theory of financial problems does not make sense. Besides, we did not seize AIG, Citibank or Goldman Sachs. We just gave and lent them $12 trillion.

If you know the real story here, I would love to hear it.

U. S. seizes top credit union clearinghouse

Matthew Stewart emits a most entertaining article about the worthlessness of the MBA degree and MBA schools, from which we get:

The only semblance of a theory behind modern business education is that it purportedly produces “experts” in shareholder-value maximization who are capable of forming an ideal, self-regulating market.

Having just gone through the hell of trying to obtain a loan for a couple of acres of land and basically having to take 7.25% interest up the arse, it warms the cockles of my heart to know that at least some people are finding it easy to obtain cheap loans at very good rates…well, I assume they’re not charging themselves 7.25%.

Banks nationwide hold $41 billion in loans to directors, top executives and other insiders, a portfolio that experts say should be stripped of secrecy.

Insider lending to directors is particularly troublesome because it could cloud the judgment of people charged with protecting shareholders and overseeing bank management, the experts say.

At Charlotte-based Bank of America, those loans more than doubled last year, to $624.2 million — the biggest dollar jump in the country. The largest of them likely went to three directors or their companies. The surge came during the third quarter as credit markets froze, the government prepared to infuse banks with billions in tax dollars and the board approved the purchase of troubled Merrill Lynch.

Bank of America ranked fourth on the list of biggest insider lenders. At the top was JPMorgan of New York, which held $1.48 billion in insider loans, mostly by directors or their companies.

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Insider loans, ranging from home mortgages to multimillion-dollar lines of credit for big companies, are legal but are largely shrouded from public scrutiny.

Banks don’t have to explain increased insider lending. They don’t have to disclose individual loan amounts or terms for any insiders, including executives. Directors and their businesses, often the largest insider borrowers, are completely shielded. Directors must approve insider loans greater than $500,000, so they sometimes vote on loans for each other or the executives they oversee.

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Most publicly traded companies were banned from making insider loans in 2002, part of the regulatory rush following the collapse of Enron and other accounting scandals.

But banks were excluded from the ban, partly because they’re in the business of lending and also because the loans have been subject to extensive regulation for more than 25 years.

The loans were blamed for bank problems during the nation’s S&L crisis. Lawrence and others have linked insider lending to bank failures. In December, the chairman of a large Irish bank resigned after revelations he had $109 million of secretive insider loans. In January, the government seized the Dublin bank.

“Studies of bank failures have found that insider abuse, including excessive or poor quality loans made … is often a contributing factor to the failure,” says the “Insider Activities” handbook from the Comptroller of the Currency, the lead regulator for big national banks.

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Carolyn Betts was an attorney working with the RTC during the S&L crisis, and begs to disagree with Timmy favorably comparing his latest plan to what was done by the RTC during that crisis.  She also offers an intriguing solution in her last point.

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I have been poking around the legal and contracting market to find out what work there is out there in reviewing, collecting data on and valuing the billions and billions (trillions?) of dollars of “toxic assets,” including the mortgage backed securities, CDOs and other derivatives created and backed by mortgages that are now “toxic.” I have several observations after reading media accounts of the Geithner plan for so-called public-private partnerships to purchase these vaguely described “toxic assets.”

POINT #1: We need to be defining exactly what these “toxic assets” are. One size does not fit all in this regard. It makes a difference whether we are talking about single family residential mortgages that are somewhere in the procedural process of being past due, in foreclosure or REO (i.e., real estate owned by the lender following foreclosure), which can be valued fairly readily, or, at the other end of the spectrum, derivatives based on derivatives that are subject to pooling and servicing agreements that put strict limitations on what work-outs can take place to resolve the “toxicity.”

POINT #2: If non-performing assets are to be sold to private investors, those private investors will only pay the best possible price if they have access to reliable data upon which to base their bids. I talked to a senior partner in a DC-based law firm who knows everything there is to know about what goes on in Washington having to do with mortgages. He said he is unaware of any significant efforts to hire government contractors to undertake the type of loan due diligence, review, data collection and valuation that would have to be done to conduct sales of the “TARP” assets that have been talked about since the fall of last year and earlier.

I talked to a national legal temp firm and asked whether there was any work available in toxic asset review. The recruiter said that her firm had expected to see a lot of that type of work coming down the pike, but there is nothing of that type out there so far. By all accounts, government regulators like FDIC and SEC are short of funds, and FDIC is hiring a lot of bank examiners. If you go on USAJobs and look for job openings with FDIC and the Commodity Futures Trading Commission, there are few or no openings for experts in valuing or otherwise dealing with non-performing loans.

We have been talking about the bursting of the housing bubble for over a year now, and there seems to be no one taking any initiative in categorizing, stress-testing, quantifying, defining, analyzing, valuing or otherwise collecting information to define the problem. And if any of this is going on secretly and behind closed doors in Washington, then shame on them. Real estate is all local. And if we don’t know what the problem is, any proposed solution will fail.

POINT #3: The New York Times article describing the new Geithner plan says that it is similar to what was done by RTC during the S&L crisis. Well, the Geithner “TOPS” plan not similar to anything I saw at RTC. RTC hired interdisciplinary teams of qualified major accounting, legal, investment banking and other financial advisory professionals to analyze and document all relevant information that an investor would need to value its multi-billion-dollar portfolio of non-performing commercial loans.

We knew what documentation existed and did not exist and what was the status of contractual cash flows, lien positions, bankruptcy cases, underwriting defects and local developmental approvals for the projects and often had pictures of them. We organized “war rooms” where investors could come to look at the loan and other legal documents and we performed various valuation-related calculations and provided them on a disk for a small fee to interested bidders. We interviewed potential wholesale and retail buyers to find out what kinds of sale terms would attract their interest. We provided seller (i.e., government) financing as an alternative to the cash price, with self-executing terms and government sharing in the up-side, so that there was as little future work on the part of the government as possible and the government would not be fleeced. There were very limited government representations and warranties and “put-back” rights and no government guarantees.

What was the result? The first few sales yielded fairly low prices, and the winning bidders made a killing. When others in the financial markets saw that, they bid up the prices in future sales and the government generally got respectable or even amazingly high returns for future sales. Gradually, local investors who knew of the specific projects came out of the woodwork and made informal work-out deals with owners of the projects, which allowed them to bid higher than the New York capital market investors like Goldman Sachs and GE Capital. We facilitated the formation of bidding groups comprised of smaller bidders interested in dividing up loan pools among themselves to bid against capital market bidders. This was the best outcome for the local communities, of course. Very few bidders took advantage of the seller financing, because they found private money cheaper and didn’t want to share the up-side with the government.

What Tim Geithner has proposed has virtually nothing in common with the transactions I worked on with RTC, although I admit that single family mortgage solutions are not the same as those for commercial mortgages. But we have as a model for non-performing single family mortgage sales the work of Hamilton Securities, together with Merrill Lynch, Ernst & Young Kenneth Leventhal, C & S First Boston and Cushman & Wakefield, as financial advisors to the Federal Housing Administration in the auctions of single family non-performing mortgage loans sold from FHA’s portfolio in the mid-90s. Those sales were similar to the RTC sales before, but employed more sophisticated relational databases and other digital tools as well as state-of-the-art optimization software for evaluating bids. In those sales, FHA increased its recovery rates from about $.35 on the dollar to $.70 - $.90 on the dollar, saving several billions of dollars for taxpayers. That was when a billion dollars was a lot of money. In none of these sales did the government provide guarantees, seller financing or puts or allow bidders to be in a heads-I-win-tails-you-lose position as appears to be the plan for the toxic assets in the twenty-first century housing bubble.

POINT #4: There needs to be a plan to figure out how to deal with some problems going forward. I see no sign of new government regulations that would prevent more of the same, including credit default swaps in the trillions of dollars.

• No Congressional or regulatory action is in the works, to my knowledge, to exercise regulatory authority over these “financial weapons of mass destruction.”
• For all we know, more credit default swaps are being issued as we speak to bet on future financial institution collapses.
• The Financial Accounting Standards Board is talking about loosening the mark-to-market rules that require banks to disclose to regulators and stockholders the actual current value of their assets, with no hue and cry from the SEC (which has the power of regulation over financial statement standards for public companies).
• Hedge fund investments are still unregulated by the SEC.
• The Chairman of the SEC says the agency doesn’t have enough money to do its job, including the conduct of investigations of things like the illegal naked short selling that appears to have brought down Lehman Brothers.

When I was an internal auditor of a NYSE member firm, there was a rule (apparently dropped at some point during the last ten years) that prevented short sales except on an up-tick, meaning that there had to be a purchase for every short sale. This prevented severe market drops as the result of massive short-selling. And, of course, my firm had to borrow a share of stock for each share our clients sold short. There was no naked short selling. And fails to deliver were investigated, with strict disciplinary action taken unless a good explanation was forthcoming.

POINT #5: In my view, the only hope we have to make good on, or reduce the losses on, the “toxic” mortgages at issue is to manage them on a local level with community involvement. I have a friend in the real estate business who is interested in purchasing houses in foreclosure and working out a plan to help the former owners get jobs or otherwise deal with the financial problems giving rise to their defaults. He would allow them to continue to occupy the houses as renters and repurchase the homes in the future after getting back on their feet if they so desire. If this type of action were taken on a community-wide basis with the cooperation of local governments and businesses, a lot of heartache in all sectors could be avoided. We cannot guarantee or borrow our way out of this as a society. We need to put people to work producing things of value.

From Animal Spirits:

This is financial fascism, perpetrated by the New York and Washington financial oligarchy centered on Goldman Sachs.  If history rhymes, as these folks bankrupt the country and send the vast majority of Americans into heavily taxed wage-slave immiseration, with no sense of control whatsoever over their country’s government, the oligarchs will be looking for a war to send the youth of America off to fight and die in.  Look for that in about ten years.  But they may get themselves a revolution instead.

Doug Henwood’s speculations/suspicions are quite similar to my own.  I’ve basically been assuming that after the bailouts have finished bolstering the entitlement programs of the rentiers there’ll be an IMFesqe austerity program forced on the proles.  On the one hand, it’s not going to be easy for those on the lowest parts of the totem pole to survive with no job, no unemployment benefits, no medical care and, frankly, no nothing except of course an even further jacked-up police state presence to keep them from getting all uppity and shit.  On the other hand, when they ain’t got nothin’…

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It looks like the intention of the Geithner scheme is to try to restore the status quo ante bustum, with private equity and hedge fund guys running around remaking the economic landscape with big gobs of borrowed money. Is the ultimate point of this plan to bring back the world of 1999 or 2005, when easy credit fueled speculative bubbles and overconsumption? That doesn’t seem like a live option.

There’s a more sinister possibility: the bailout will be funded by an austerity program. That is, all the trillions being borrowed to spend on bailouts and stimuli will save the financial elite, but at the costs of a fiscal crippling, and instead of raising taxes on the very rich to pay down the debt, there will be deep cuts in civilian spending. With the economy remaining weak, employment would stagnate and real wages fall—a prospect that would, by restricting consumption and therefore imports, bring the U.S. international accounts close to balance. Then we wouldn’t be dependent on Chinese capital inflows anymore—and the overprivileged wouldn’t have to give up lunching on $400 stone crabs. Is that the hidden agenda? It is coherent, if cruel.

U.S. workers are certainly used to long-term declines in real wages: the average hourly wage, adjusted for inflation, is almost 10% lower than it was 36 years ago. But the blow of that fall was significantly softened by the availability of easy credit, which allowed people to maintain the semblance of a middle-class standard of living. What would wage cuts without easy credit look like? What kind of retooling would be necessary for an economy now dependent on high levels of consumption, and a society dependent for legitimation on the same? Hard to say, but we should start talking about it.

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Being largely ignorant of Shaw’s plays - other than reading a couple many years ago during a considerably more naive time - I found Louis Proyect’s Guide to G. B. Shaw on Home Video of considerable interest.  Here’s a bit from the preamble:

Shaw’s plays represented a dual challenge to me. Were they the masterpieces that my high school teachers insisted they were (Shaw was not taught in my college at all)? Were they weak politically despite Shaw’s socialist reputation? As it turns out, these questions could not be answered with a simple yes or no. It is far easier to answer another question, which is whether his works still have the capacity to entertain and inspire. On this, I can offer an emphatic yes. On the politics, one can say that Shaw was limited by his Fabian preconceptions but since his plays dealt with class contradictions inside Great Britain rather than relations with the colonial world, they are not only unobjectionable but positively inspiring. Nobody hated the class system more than Shaw, at least those making their living as writers — that is, until the Great Depression turned a whole new generation of writers against the decaying social system.

Before launching into a discussion of the six videos I managed to take in, let me make a few observations about Shaw as artist. The first thing that struck me was how so many different genres appear to be influenced by Shaw, from the screwball comedies of the 1930s to PBS Masterpiece Theater’s “Upstairs, Downstairs.” As a shrewd observer of the social conventions of the rich and the poor, he found their conflict an endless source of artistic inspiration even as he was on record for calling for their abolition. Perhaps there is no British playwright who has a better knack for mining both the foibles and the strengths of the servant class than Shaw — except of course for Shakespeare.

The other thing worth noting is Shaw’s linguistic gifts. Listening to his dialog is a reminder of how much Anglo-American culture has declined since the 19th century. Just as there will never be another Beethoven, there will never be another Shaw. His ability to find the perfect turn of phrase for the occasion was obviously the outcome of his exposure to great British literature. Anybody who has read Jane Austen will be struck by Shaw’s flair for the ironic observation. Furthermore, when you see some of the more inspired screwball comedies of the 1930s, you will recognize immediately that a Preston Sturges not only read his GB Shaw both in high school and in college, but absorbed the literary and dramatic style completely. Nowadays, in the decline of Western civilization across the board, a Hollywood screenwriter is more likely to have learned his craft by watching television situation comedies.

Now to obtain any of the six dramatizations under review.

From Michael Doliner:

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All debt, all notes, are promises to exchange that debt for Federal Reserve Notes (legal tender for all debts). Now the US debt is about $52 trillion (see the stats), way more than we can ever hope to pay, but as Dick Cheney might say, “so what?” Remember my scheme at the beginning. As long as all those holding this debt are happy to hold it, it doesn’t matter that it’s way beyond our ability to pay. And anyway, (heh, heh, heh) we never said just what we would give in return for all these Federal Reserve Notes. So the question becomes: At what point do those holding Federal Reserve Notes become uneasy and decide to exchange them for whatever they can get that’s valuable right now because they fear inflation? So far, even though the amount of Federal Reserve Notes out there far exceeds the putative value of what those who hold the notes expect to get for them, they are still holding on. Why?

The answer seems to be that they, the Chinese, Japanese, Russians, and others don’t want to upset the “system.” They know all the Federal Reserve Notes and securities they might exchange for Federal Reserve Notes could not all be exchanged for something real without soon exhausting all real stuff or, what is more likely, popping the mother of all bubbles and creating wheelbarrow inflation. So these holders of Federal Reserve Notes hold them not because they think they are really valuable (no one in his right mind would think that) but because they are afraid of bringing the whole clever, bizarre game to a sudden popping end. For the truth is that they are playing the very same game with their “fiat” currencies, though not as well as we play it. If one goes they all will.

What would make everybody decide to unload Federal Reserve Notes at once, bringing the “system” crashing suddenly to the ground? Who knows? It seems to be a question of psychology. If the Chinese or maybe the Japanese or maybe the Russians panicked and decided to unload their notes, then, suddenly, all Federal Reserve Notes would buy less, and everybody might, probably would, sell as fast as possible. But, since that would crash the system, maybe the Chinese won’t sell even though their notes are worth less and less, because they don’t want to blow the whole delicious game and bring civilization to an end. Will they, won’t they? To decide they peek at the Russians, the Japanese, the Saudi Arabians. What kind of cards are they holding? Are they going to unload? Oh, shit! Then we had better unload. It’s like musical chairs without the music.

Now everybody says that this can’t go on forever. But why? If $52 trillion hasn’t set off massive redemption of Federal Reserve Notes why would $100 trillion or a quadrillion? Whoopee! Since Federal Reserve Notes were never backed by anything, no real promise of anything, no real reputation for probity, no guarantee of any tangible value, what could possibly discredit them? They don’t need credibility; they have military might behind them. You are free to choose between the Yankee buck and a toe in your ass.

It is with this in mind that I propose the following guaranteed solution to the entire financial mess. Take all the delinquent subprime borrowers, the Bernie Madoff victims, the homeless bums, the credit junkies, the laid-off workers, all your tired, your poor, and those yearning to breathe free, and allow them to issue Federal Reserve Notes. All our problems would be solved. Since Federal Reserve Notes do not depend upon the probity of those who issue them (Congress is part of the government) it doesn’t matter what any of these people have done in the past. Nor does it matter that they are all stone cold broke. They themselves would not be making any promise to pay! Since the Federal Reserve Bank, in issuing a Federal Reserve Note, promises nothing, why not let the wino in the alley promise nothing instead? Both the new and old notes would be backed by the whole American people and everyone else we can intimidate. It’s a win-win situation!

Subprime borrowers would pay off their mortgages with notes that they themselves issued; the Madoff victims, able to write their own tickets, wouldn’t care any more; credit junkies would binge on, and the unemployed would just kick back, safe in the knowledge that when they needed food for their children they could just issue another Federal Reserve Note! The Chinese would just keep sopping up the excess Federal Reserve Notes to keep the system from popping. And the party would roll on!