Banks collapsing, countries on the edge of bankruptcy, a near-return to the Great Depression. All looks somewhat surreal when viewed from the other side of the planet, does it not?
Precisely when – or how – the global crisis will impact on ordinary people in Asia is hard to estimate, but it’s likely to, in the first wave, be felt in a variety of manufacturing industries across Asia, including here in China, that rely on the U.S. and Europe for most of their exports. So, in the short term, it seems that China is heading for lay-offs and closures among small manufacturers of anything from sweaters to DVD players, as the ordinary folks of the Western world star to become more prudent in their spending patterns.
What has struck me as most bizarre during this month’s crises is the bailout, which has become, in the American model, a curious sort of socializing of the losses. If you thought that ‘capitalism with Chinese characteristics’ was a freakish hybrid, it has nothing on the hypocrisy of Bush’s vast bailout, in which he suddenly found close to one trillion dollars – try saying “one trilllllllion dollars†with your little finger pressed to your chin, Austin Power’s style; it’s kinda fun – down the back of the White House sofa.
Here’s my little cartoon on the subject. Please wait a moment for all three panels of the cartoon to display.
Any alternative takes on the bailout; any chances China might intervene – help, even – with its (literally) couple of trillions of dollars of foreign reserves, having bought up much of America’s bad debt over the past decade?
It blows my mind that most of America still reacts with a 50s-style reaction to anything socialist… yet is quite happy to pay an amount of money that I can’t even conceive of to bail out rich folks under the guise of “social stability”. I’m not saying it’s the wrong thing to do… I’m just saying it (like your comic) is fucking hilarious.
But, and much unlike your comic, is ultimately sad and tragic.
Ryan,
Haha, true that! I’m personally pretty anti-socialism, so I DESPISE this bailout. The goofy thing about America is that when we see projects of socialism that we like, we reprhrase them in ways that take out the “socialism” aspect and easier to swallow. Personally, I say DON’T give any bailout, and let all those involved suffer, including the greedy banks as well as the greedy homeowners who bought homes they couldn’t afford.
But here’s a Devil’s Advocate take, that I’m personally trying to convince myself of, simply because I see no way out of NOT having the bailout at this point:
Like them or not, Wall Street pretty much runs the country and economy. So if they fail enmasse, the whole nation suffers, probably in ways much worse than 700 billion. If we allow the financial market to collapse fully, EVERYBODY who needs to get a loan, including homeowners, small businesses, college students, and corporations, will suffer as well. People will get fired, prices of goods will go up, the economy on a whole will weaken to a very bad state. And the sum total of the losses will, in all likelyhood, be far beyond 700 billion.
Does Wallstreet deserve this bailout? Heavens no, they can all burn in hell for all I’m concerned (but anybody with a brain, who isn’t politically correct, knows that the millions of american buying things they can’t afford are just as bad as the banks, yet are getting NO criticism). But sadly, they need to be saved so the whole country doesn’t fall.
But personally, as a capitalist American living in China and being paid in RMB, I’m kinda excited to see the crisis going on, that way my RMB savings will be worth enough to buy myself a very cheap foreclosed home back in the states when the time comes to return.
Steven & Ryan – this isn’t socialism or capitalism so much as fascism (it looks like we crossed the line from corporatism to straight out fascism with the latest bailout and additional $1 trillion plus in maneuvers by the Federal Reserve).
Hi Chip – that’s the mainstream view of things, but the failure of a number of banks or the financial system would not bring the world to an end – the same amount of capital, labor, and resources would still be available, it’s just who had access to these factors of production would change (a lot of banks and the businesses dependent on them would go out of business, but their assets would be bought up by someone who could actually afford them). Credit creation does not change one bit the amount of real capital available to us all, it just changes who is able to access it.
The alternative is a lot worse – printing money will only lead to ever higher inflation, and the additional transfer of greater power and money to banks and the sick companies they lend to will only hurt the real economy.
I’d totally recommend reading through any or all of this:
The Bailout Reader
Lol love the comic, cheered up my day, thanks 🙂
thanks for chipping in, everyone; especially Chip and Jeremy for their detailed thoughts.
Indeed, I’m not totally against the bailout (desperate times call for desperate measures, etc etc), it’s more the hypocrisy of it, especially in the US, where “socialism” is one of the dirtiest and most unutterable words. but why always refuse to call a spade a spade?
the European Union’s version of the bailout, IMHO, seems to make more sense, and attaches more responsibility to the banks in terms of capping pay-outs and bonuses during the time of their semi-nationalisation.
personally, i’d like to see bankers begging on their hands and knees, in the streets, for loans from the people. just for a few days; that’d be sufficient 😉
I don’t like the bail-out either but for different reasons than most. Anyway… something I think a lot of people forget is that the economy is circular. The rich bankers do not keep that money under a pillow. They spend and invest that money. That money is spent at the place where you work, and some it goes to you. The money eventually makes it back to the banks and goes around another time. The more money there is in the system, the more there is available to be given to you (if you can find a product or service to offer). The bailout puts the money into the system in the wrong place, but it will still make it through the whole system.
All that to say, the question should not be, should we spend that much? It should be, are we spending it in the right place?
Steven – Definitely full of hypocrisy. Spot on comics by the way.
Luke – You’re exactly right about the new money filtering out to everyone, but you’re overlooking the role of prices. Bankers (or rather, who they lend to) get the most benefit from the new money since they spend it first. The second and some future recipients of the new money benefit as well.
The people who hurt the most are those who are on fixed incomes or hold many dollars – the value of their dollars decline.
Also bankers earn interest off of the money they create out of thin air through fractional reserve banking, and the scale at which they can do this is enormously increased with the help of a central bank (and legal tender laws).
So you have two ways that the value of everyone else’s money is decreased (or to put it more bluntly, two ways in which purchasing power is stolen from some and given to others): Early recipients of new money can buy than before and at prices that are still low, and bankers earn interest out of money that didn’t exist before.
Printing money or creating new credit doesn’t make us one bit wealthier as it doesn’t create any new capital, resources, or labor – if it did then countries like Zimbabwe would be the richest in the world. All it does is change who has access to these factors of production.
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