By Dr.Kalyanaraman
This is just at tip of the iceberg, this biscuit thrown at the financial dogs to bailout financial institutions in the USA. Mortgage-related assets are only part of the reason for the broken financial system of this monster called the US economy.
I had mentioned about catechism of money (money becoming a commodity) and the major broker of this commodity is the marketplace of America. After all, evern petro-dollars have to find a sanctuary only in this marketplace (how clever could Kissinger get in the wake of OPEC cartel flexing its muscles to control production of fossil fuels!)
The roots for the oncoming collapse of the system lies in treating money like a commodity. This situation is comparable to the times when Karl Marx noted that labor was becoming a commodity (catechism of labor) which resulted in ‘communism’ or ‘socialism’ becoming buzz-words in organizing the state machineries to cope with national identities. Now that money has been made into a commodity with all types of instruments (puts, options, derivatives, forward trading, exchange rate manipulations, central bank interventions as ace manipulators, IMF-type pundit fiscal (principally budget deficit management) prescriptions for the illiterate economies, for example, those of the third-world countries, mutual funds, participatory notes and the list goes on). There are also private actors typified by Soros who operate in the trading of this commodity in its variety of packaged forms.
The old-fashioned prescriptions for creating wealth (as in Adam Smith’s Wealth of Nations) have been put upside down, on their heads and merely having money in swiss bank accounts or safe-haven territories such as Isle of Man, Cayman Islands or even Mauritius to name a few sanctuaries of the financial system guarded by the might of the military to keep these small territories and islands as secure places to keep paper transactions.
An old-fashioned prescription, for instance is a definition of wealth as something which produces opportunities for employment. If land is wealth, cultivating it produces employment and so on.
This definition of wealth has been changed. Wealth is something which produced opportunities for producing money. If mortage loan is an asset for a financial institution, money is produced through financial charges and a suite of interest rate package (variable, fixed and many variations of such rates cited for money). Money itself become the only salvation. Wealth is irrelevant and at most, incidental, such as producing a building to live in. If the real worth of this building is use of wood logged from 100 trees, the ‘wealth’ in the mortage-type definition is multiplied a hundred fold into an army of financial advisors and investment advisors playing games with ‘money’ as a commodity and with nobel-prize- winning economic pundits producing econometric models to prove how the irrational exuberance gets crazy yet yields money which is the only be-all and end-all of all wealth-creating activities. Employment? What employment? Keeping the able-bodies citizens gainly employed giving opportunities for realizing their full potential are cliches used during election meetings at election time and do not constitute the driving force for wealth-creating decisions.
Okay, $700 b may help keep up the charade of Freddie Mac or Fannie Mae as market-driven institutions which can stand on their own without treasury bail-out. Today, AIG may be given a loan of $80b and tomorrow, they may also need a treasury bail-out of insurance-based- assets.
The jolly good times of treasury-wall street pow-wow will continue as the market indices girate, leaving the poor farmer in a remote Indian village to contemplate suicide as rina mochan – deliverance from this debt-trap.
To get out of the debt-trap, Uncle Sam needs more than a peanut $700 b package for financial institutions dealing with mortgage-related- assets. Uncle Sam may need a crash program to build houses for free, just as Pres. Eisenhower inaugurated the grand scheme of national highways to employ the returning soldiers from the second-world- war theatre. Now, switch them into building workers. That may help.
Does India have lessons to learn? First get rid of false heroes like Substitute Manmohan or PC and give work for people so that they can create wealth-producing assets, the old-fashioned way.
Money is NOT the measure of man. The joy of work is.
dhanyavaadah.
Kalyanaraman
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