“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.”
Doug Henwood (via azspot)

Notes

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