Economic analysts around the globe are asking if the current US banking failures herald the end of the free market economy. Hoping to free up choked credit and avert possible broad market turmoil the $700B emergency bailout plan to buy up sour assets has other nations questioning the current US economic model.
Placing the burden of salvaging major lending institutions on taxpayers has not only nationalized our economy, coupled with our debt in Iraq and Afghanistan damaged our prestige and credit worthiness abroad. One potentially positive consequence of all this is reflected in a new poll by the Pew Research Center. Americans are increasingly in favor of reducing US foreign military commitments in favor of focusing on domestic issues.
At this writing the House has rejected the new, 110 page bill to bailout Wall Street by a vote of 228-205. Critics of the plan rightly note, that unlike the 1933 New Deal, this bill does nothing to improve public works, schools or national infrastructure. Instead the bill rewards the very bankers who have proven to be incompetent to handle our funds.
Perhaps most importantly and not at all spoken about, this monumental crisis illustrates in crystal clear and spectacular empiricism the folly of centralized essential services. Just as a single power plant losing 2 hertz in Ohio can bring down the single machine grid and cut power to ten million people across the Northeast and Midwest America and Canada, so to can the folly of a handful of bankers bring down the economy across the globe. Decentralizing our banking industry makes just as much sense as decentralizing our electrical grid and power production.
So the US dollar continues to tumble and our international standing plummets with it. Oil producing nations are keeping a tight eye on our central bank as noted in Arab Times.
Banks and money managers borrowed a record amount from the Federal Reserve during the week, nearly US$188bn a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression. The data on borrowing from the Fed closed out another day of high anxiety in global money markets. Key measures of funding stress hit record levels on both sides of the Atlantic as nervous market participants awaited developments from Washington on a US$700bn financial bailout plan. Federal Reserve data showed the total amount banks borrowed nearly quadrupled the previous record of $47.97bn per day just the week before.
Congress might have learned from the Great Depression and from the increasing electricity blackouts we continue to experience and this new financial crisis that centralization is just bad for national security. Unfortunately they hope to shore up the same practices that brought about this downfall in the first place and from here, it feels very much like my pocket is being picked.
As winter approaches and many Americans struggle to heat their homes it may be reassuring to know that the PTC (Federal Production Tax Credit) was extended by Congress. The PTC provides a tax credit for large institutional investors with passive income and is firmly believed to be important in the development of utility scale renewable energy development like wind.
On the one hand this is great news for the future of clean, inexpensive renewable power though it further erodes our tax base. On the other hand the taxpayer may soon be rescuing the same institutional lenders who qualify for the PTC. Unfortunately the taxpayer will pay the cost of the PTC and pay the interest on the money borrowed from China to finance it.
