Today, in my efforts to singlehandedly salvage the economy, I have devised an indicator of our overall economic health. It's called the WTBI, the We're Totally Boned Indicator. It multiplies the seasonally adjusted GDP of the United States by the consumer confidence index, then divides by the percentage of Americans with health insurance (not including Blue Cross, because it's crap), then adds the expected number of years until either The Singularity or the Zombpocalypse renders the economy moot multiplied by the eighth root of the national debt, divided by the number of times Glenn Beck used the word "socialism" on his last show. The sum is then multiplied by the Krugman inconstant, which is whatever value it needs to be so that the overall answer is 7.3 (pretty boned).
The bonededness indicated by the WTBI could spring from a variety of sources. But I think it's reacting to early evidence that the government's "bad bank" plan will be a singularly high-bonosity event. Here's the deal: You know all that money we gave to Citibank and Bank of America, so that they would be able to survive despite despite having all those "troubled assets" on their balance sheets? So that they could keep lending out money, so that the economy wouldn't go down like a submarine piloted by rabid chihuahuas?
Well, they're not loaning out the money. We knew that already, both because it's been on the news and because I'm still unable to get financing for the Samuel T. Swartwout Memorial Water Slide and Killer Robot Thunderdome.* We already knew that they were instead using some of that money to buy out their smaller, more responsible competitors. What we've just learned is that they're also using the money to buy up more troubled assets!
Why does this make sense? Three reasons:
1) The banks are gambling with taxpayer money, so hey, why not?
2) When the government starts buying the assets -- correction, starts buying the risks associated with these assets, while letting our corporate masters buy up the rewards -- the troubled assets will be selling for quite a bit more than they can be sold for now.
3) Buying new junk inflates the prices currently being paid in the market, which makes the junk already piled in your backyard look more valuable.**
That fuzzy line between "saving vital parts of our financial infrastructure" and "raining taxpayer money down on the fine Americans who smashed the machine in the first place" just got a whole lot fuzzier.
When Russia collapsed, it was because the entire country was looted from the inside by corrupt oligarchs. Fortunately, we're not Russia. Unfortunately, the main difference is that they knew how to live on vodka and borscht, and were therefore more prepared for the decline. Barack, you promised hope and change? You see what's going on here? Change that!
I'm not hopeful.
* Opens Spring 2017. Closed by health department, Fall 2018.
** Thought experiment. Say that two guys, Bill and Phil, both have a pile of rusty carburetor parts in their backyard. They both have wives, who want the crap gone. They both put up some ads on Craigslist, they each sell the other $300 worth of parts, and then point to the ads and to the successful sales as evidence that the parts are nothing short of rusty gold.
Wait a minute. I think I've found the way to revive our economy. Timmy, get Geitner on the phone!