Washblog

We need the underlying foundation of our financial system to get a shoring up, both in terms of trust and actually financial strength.  We need to bring the financing of our state and local governments back into the hands of the people who live in those states instead of depending on the Gods of Wall Street to sign off on multi-billion dollar deals.

Here are some ideas:

1. A bone from Congress, saying that state and municipal bonds may be sold in denominations of $100.  Bring them into reach of the people who want the secure savings opportunities presented by local governments backed by a strong Federal government.

2. A way for people to buy those bonds that is regional, not global through the brokerage firms.  Something like this website for Washington and other states.

3. Open up these opportunities at local credit unions and local banks, similar to the CD's being offered in support of the Veterans Family Foundation.

4. This is part of the core operations of government that we don't learn in school anymore.  We need Randy Dorn to get the message that we need civics education in schools, not just about voting but how our government operates.  Tax systems, credit systems, personal finance and how important it is NOT to go into personal debt except for big lifetime purchases like homes or cars, etc.

Economists and policy-makers are not thinking. This enormous financing need comes not to a well-managed economy that can take the additional debt in its stride. Instead, it comes to an economy so badly managed that there are no reserves.

Massive US trade deficits have been financed by giving up US assets to foreigners, who now own the income flows as well. Budget deficits from six years of pointless wars and from unsustainable levels of military spending have helped to flood the world with dollars and to drive down the dollar's exchange value. Consumers themselves are drowning in debt and can provide no lift to the economy. Millions of the best jobs have been moved offshore, and research, design, and innovation have followed them. Considering America's dependency on imports, part of any stimulus package that reaches the consumer will bleed off to foreign countries.

Generally, when countries acquire more debt than they can service, they inflate away the debt. If foreign creditors do not save the Obama administration, the Treasury will print bonds and give them to the Federal Reserve, which will issue money.

The inflation will be severe, particularly as Americans will not be able to pay for the imports of manufactured goods from abroad on which they have become dependent. The exchange value of the dollar will decline with the domestic inflation. Once inflation is off and running, the printing press dollars will only have goods made in America to chase after. The real crisis has not yet begun.

Paulson should rethink the automakers' and FDIC's proposals. A bank produces nothing but paper. Automakers produce real things that can be sold. Occupied homes are worth more than empty ones.

Paulson's inability to see this is the logical outcome of Wall Street thinking that highly values deals made over pieces of paper at the expense of the real economy.

Arthur
What they inwardly imagine is the only thing they'll accept.

They had a tape that had been made about the consequences of Greenspan holding down the Fed interest rates....

Also, there is a columnist in the WashingtonPost named Steven Pearlstein who I am reading regularly.

Crisis and Opportunity.  Maybe things can be put on a different footing.  Does not help retirees I know who are trying to find a job.

By the way -- the King County Fair was funded.  But, I still think IT needs otbe put on a different and more collaborative with the community footing...