The Bottom Line: False Weights and Measures

At bottom, the issue involved in this financial crisis is false weights and measures. That is, a standard of valuation that is manipulated, making people believe they are receiving something other (of lesser value) than they actually are.

The Bible has this to say about such false weights and measures:

Le 19:36 Just balances, just weights, a just ephah, and a just hin, shall ye have: I am the LORD your God, which brought you out of the land of Egypt.
De 25:13 ¶ Thou shalt not have in thy bag divers weights, a great and a small.
De 25:14 Thou shalt not have in thine house divers measures, a great and a small.
De 25:15 But thou shalt have a perfect and just weight, a perfect and just measure shalt thou have: that thy days may be lengthened in the land which the LORD thy God giveth thee.
De 25:16 For all that do such things, and all that do unrighteously, are an abomination unto the LORD thy God.
Pr 11:1 ¶ A false balance is abomination to the LORD: but a just weight is his delight.
Pr 16:11 ¶ A just weight and balance are the LORD’S: all the weights of the bag are his work.
Pr 20:23 ¶ Divers weights are an abomination unto the LORD; and a false balance is not good.
Eze 45:10 Ye shall have just balances, and a just ephah, and a just bath.
Eze 45:11 The ephah and the bath shall be of one measure, that the bath may contain the tenth part of an homer, and the ephah the tenth part of an homer: the measure thereof shall be after the homer.
Eze 45:12 And the shekel shall be twenty gerahs: twenty shekels, five and twenty shekels, fifteen shekels, shall be your maneh.
Mic 6:10 Are there yet the treasures of wickedness in the house of the wicked, and the scant measure that is abominable?
Mic 6:11 Shall I count them pure with the wicked balances, and with the bag of deceitful weights?
Ho 12:7 ¶ He is a merchant, the balances of deceit are in his hand: he loveth to oppress.

In the current financial muckup, this falsification of the standard of value occurred thanks to a complete failure of functioning by the leading credit rating agencies. Subprime mortgages were packaged into bonds that were passed off as AAA -- the highest rating possible. Given the great demand for such safe-haven assets in a global economy awash in liquidity, these bonds were purchased like hotcakes, making for ever-increasing demand for subprime mortgages to be packaged into these bonds (CDOs, MBSs). They thus spread throughout the world. The questions which now arise are:

1. How many banks and other lending agencies have these assets on their balance sheets, and to what degree?
2. What is the degree that each of these assets is contaminated with subprime mortgages which either have already failed or will fail?
   

The recent "bailout" package passed by the Congress is intended to get this auditing process under way in the US. The question is, will it accomplish what it is supposed to, without subverting the system even further? Be that as it may: who is going to take care of this process in the rest of the world? And what is the best way to take care of it? It is the mother of all tangled messes.

The bottom line is, this was a catastrophe from start to finish egged on and smiled upon by the government, in pursuit of social justice, of Joe Biden's "fairness." It is the government that is supposed to supervise the functioning of such services as credit rating, simply as a matter of averting fraud. Instead of doing that, it turned a blind eye on the whole procedure, the better to achieve the stated goal of affordable housing.

Capitalism was set to work under the constraints set by the government. Now that government has nearly destroyed capitalism, it is going to fix it. How: with more of the same?

The Book of Amos speaks of a judgement upon a nation addicted to false weights and measures:

ch 8, verse 4: Hear this, O ye that swallow up the needy, even to make the poor of the land to fail,
5 Saying, When will the new moon be gone, that we may sell corn? and the sabbath, that we may set forth wheat, making the ephah small, and the shekel great, and falsifying the balances by deceit?
6 That we may buy the poor for silver, and the needy for a pair of shoes; yea, and sell the refuse of the wheat?

Amos's Israel was judged and found wanting; it was given over to conquest by the Assyrians.

What judgement awaits us? For we keep voting in people who, this time around in the name of the poor, love the false balance, the small ephah and the great shekel, who have hung this catastrophe around our necks and then blame the faithful servant (Wall Street) who in fact carried out their bidding; who want us to return them to office for more of the same.

That in itself is judgement I cringe to think about.

It's Starting

The Fannie Mae-Freddie Mac push which, I argued in a previous post, needs to be made by the McCain campaign has finally begun. May Senator McCain not let up on this until election day -- and beyond, regardless of outcome.

The consequences of not exposing this are too serious to even contemplate. These people, willingly or unwillingly, knowingly or unknowingly, are destroying the entire capitalist edifice. Come to think of it, perhaps they wouldn't mind it so much if the whole thing did go down. They could take over each failing element one by one, until the entire economy is government-owned and operated. What a prospect!

More than an Analogy?

One of the themes running through my head regarding a description of the current financial crisis is that of the similarity of subprime mortgages to HIV. Just as HIV gets in the bloodstream and destroys immune capacity, subprime mortgages were packaged together in MSOs and CDOs which, circulating through the banking system, in turn have destroyed the banking system's capacity to deal with bad risk.

But the analogy is even more appropriate given the latest news that Barney Frank's boyfriend was the one in charge of coming with the affordable housing schemes at Fannie Mae that precipitated this HIV infection of the capitalist bloodstream.

Makes one shudder just to think about it.

Maybe the Start?

This ad the National Republican Congressional Committee may be the start of the "onslaught" I advocated earlier. We'll see.

She Did It Again

Sarah Palin starred again, and has truly solidified her status as a Great Communicator of conservative ideals. Not that everything she said last night was conservative, but given the constraints of a McCain campaign, all in all an admirable performance. And what a capacity to bond with the listeners. Which is something altogether different from bonding with journalists and pundits. The quicker the media learn that distinction, the quicker they'll stop making fools of themselves.

And she did mention Fannie and Freddy. Not enough to shut down the Democrat "deregulation as cause of meltdown" argument. Perhaps that is still in the offing. Let us hope so. For it will not be until the root of the problem is recognized that the problem will be solved. To wit, it will not be until liberalism, in the guise of the push for affordable housing, is recognized as the catalyst for the explosion of easy credit and the relaxation of standards, leading to the spread of bad debt throughout the global financial system, that the buck will stop where it should, inside the Beltway, in Washington, from whence this push derived, and for which Wall Street firms were but the willing accomplices.

I Have a Dream

I have a dream.

That Sarah comes out tonight and exercises the nuclear option.

That is, that she calls out the Democrats for the Community Reinvestment Act, Fannie Mae & Freddy Mac, and all the rest of it.

This signals the start of an all-out onslaught on the part of the McCain campaign to bring that message directly home to the voters, via speeches, press conferences, interviews, advertisements, whatever. All means available.

Connecting Obama to Fannie Mae's largesse, and his community activism to the furtherance of the overthrow of capitalism.

Morphing a picture of Obama into Ché. Now that would be good advertising.

This would signal the start of a new and decisive phase in the campaign. And might just win not only the presidency but make significant gains in House and Senate.

But only if McCain and Palin stay on message.

But after all, McCain is apparently biding his time before naming names.

We'll see.

The Palin Bounce

Sarah Palin's lift to the McCain ticket seems to be evaporating. Not surprising given the uniformly negative coverage the mainstream media have given her, combined with the rather idiotic strategy pursued by the McCain campaign to present her to the nation precisely via the news media the favor of whom, she claimed in her acceptance speech, she would not be seeking.

She and McCain were going to shake up Washington. But regarding the seminal issue of the day, the "Wall Street Bailout," she has followed McCain precisely in assiduously assigning blame to capitalism run amuck rather than to where it truly lays: in Washington. The issue was given McCain on a silver platter to run on. Instead, it is successfully being used by Obama and the Democrats to undermine his candidacy. Guilt by association, deregulation, Republican congress, eight years of Bush presidency, all of these are the reason for the current crisis, and the Democrats have the echo chamber of the major media to repeat the charges ad nauseum.

The facility by which people swallow this line is yet further evidence of the visceral, yea even religious, antagonism people have to capitalism. The anti-capitalist mentality is on full display here, and the usual demagogues resort to it with impunity, even when they themselves are so blatantly, obviously, responsible for this. The truth is simple, straightforward, and can be summarized in a few phrases, each of which builds on the previous one: affordable housing (Community Reinvestment Act, National Homeownership Strategy), subprime loans, securitization (loan packaging and selling), absurdly inflated credit ratings, home price implosion, foreclosures, collapse in the value of those securitized loans, destruction of the balance sheets of entities holding those loans (Wall Street, banks throughout the entire world), collapse of all forms of credit. At the heart of this whole process were the GSEs (government-sponsored entities) Fannie Mae and Freddie Mac, who while they were sponsoring the subprime securitization explosion, also funded Democratic party activism and paid off Congressional sponsors who looked the other way. And Senator Obama in three short years received over $100,000 in campaign contributions from this sponsor of our economic destruction.

The reason why McCain-Palin ratings are tanking is because McCain-Palin have not acted on their claim to shake up Washington, and instead look suspiciously as if they are holding back so as not to rock the Washington beltway boat. This, if true, is not only a missed chance but a travesty. Come on Sarah! Get that old goat to change his bipartisan ways. If you don't, you may end up going back to Alaska for good. And that's the last thing this country needs.