Wednesday, March 19, 2008
BEAR STEARNS BUYOUT
Here's an article at Portfolio.com describing the deal that was put together at lightning speed and the anticipated lawsuits that will follow in the months to come. I'll be the first to admit I don't understand it all, but there is a nagging sense of dealmongering that smacks of privileged information akin to insider trading. We are expected to believe that an unprecedented deal could be brokered within hours. Who shot the adrenalin into the government's normally sluggish veins?
It appears we are destined to emerge from the mortgage meltdown with fewer players on the financial stage, and a greater concentration of wealth. It's an unsettling thought to me because I have just been reading an article in the March "Culture Wars" by economist Rupert J. Ederer titled "A Return to Monetary Economics". In it he talks about "commercial banks which are private corporations operating for the profit of their stockholders [who] are responsible of upwards of 80 percent of our money supply."
Ederer blames Reagan (whose understanding of economics "was not his strong suit") for signing "on to the Milton Friedman free market gospel even while he sent federal budgets and deficits along with them to the moon." He notes that for decades America saw prices rise and fall until World War II when falling prices were eliminated from the economy and a new term for a combination of stagnant economy together with inflation forced the coining of the term "stagflation". We are seeing falling prices now in the real estate market, and it seems to me this has a lot of people exhibiting the deer in the headlights look. We know about Friedman's enthusiasm for Austrian/Chicago economics. We know that it permits a concentration of wealth. And now I'm wondering if that is what we are seeing in the banking industry. Quoting Thomas Jefferson, Ederer writes: "If the American people ever allow banks to control the issue of their currency, first for inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered." A lot of people are waking up homeless these days.
Ederer made another interesting observation. I've been noticing a change in the interior decoration of banks around here. They have abandoned the "hallowed halls" image for the commercially "slick ad man" decor. According to Ederer the architecture of "great stone pillars, bronze fixtures" gave banks a "fascade of the temples of finance". Today we get color-themed fast money boxes with cheap metal furniture reminiscent of McDonalds. If our money depends upon our confidence, why the cheapening of image?
