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Last
week’s financial headlines offered a study in contrasts. On the
ostensibly sunny side of the news was the explosive evacuation coaxed forth
by the General Motors IPO. Economic optimists must have rejoiced at this
spectacle, oversubscribed and charged with hubris as it was. Just like in the
good old days, speculators and Wall Street bunko artists couldn’t get
enough of a bad thing. Or are we perhaps being unfair to GM? At best, we’d say the jury is
still out, given that it has taken $50 billion worth of Federal largesse to
elevate the once-mighty automaker from basket case to dubious recovery story.
Nowhere in the torrent of stories about the IPO was there even a word about
the actual cars that GM builds. Not that this would be a concern on Wall
Street, with its idiot savant’s focus on the deal itself. For the
record, though, we’ll mention that the latest Consumer Reports is not
exactly gung-ho on GM’s, um, product. Although the company has made strides
in engineering and quality, notes the magazine, it still has a ways to go to
catch up with foreign competitors. (And let’s not even mention the
Volt, a GM hybrid that looks like it will take every bit of a planned $7000
subsidy to move the car out of the showrooms.)
So if
the hoopla-and-hubris surrounding GM was last week’s “good”
news, what was the bad? In case you missed it, a
bankruptcy-in-progress that will eventually dwarf GM’s took another
small step toward the abyss. We are of course referring to the latest bond
sale by the Golden State -- a $10 billion debacle that drew such a tepid
response that California was forced to cancel yet another offering this week
of $267 million of debt. Too bad
they don’t have a Federal Reserve to take up the slack, since sucking
up $10 billion worth of the wishfully named “revenue
anticipation” notes would have been just chump change had it been done
Bernanke-style. Come to think of
it, California may have laid the groundwork
for just such an experiment when, earlier this year, Sacramento
paid its employees with IOUs. Why
not simply issue more such IOUs to buy its own bonds? This would almost exactly mimic what the Federal Reserve has been doing through its
“quantitative easing” Ponzi scheme. An
added plus is that the tactic might spur some public discussion of
quantitative easing itself, possibly enlightening the mumchances, mysophiliacs and groveling poltroons who bring us the news each day.
Business reporters, pundits and columnists seem not to understand the process
of quantitative easing too clearly, since, as far as we are aware, none has
even bothered to ask the question, “How does the Fed pay for all of
that Treasury paper it has been buying?” Isn’t it time they looked into
this?
Rick Ackerman
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