Another Emergency Bailout

TARP Redux

I learn a lot by watching finance channels on YouTube. There are a couple of caveats of course. The analysts and channels are greedy and usually rightwing - in varying degrees. These are people who bought into the System, often had a mentor who saw their potential and gave them the right kind of encouragement, stuck to their greed even when it should have been obvious it was a negative choice, and just got lucky. (The percentage of failed Synced-In System Sycophants is much higher than the glossy, successful influencers on YouTube and the other social media channels.) However, these people certainly know the System they integrated into their lifestyle. It is worthwhile to spend some time listening to them with a critical ear.

Finance is mostly a macro proposition. It is not about household economics or small businesses. Moving the needle on the Brent price of crude oil is a political tactic that influences policy at the federal level. When Trump creates a Truth Social post in order to move the stock market, he takes it for granted that his pontifications filter down through all layers of government and all layers of the corporate world. Shit rolls downhill and Trump does not care about Joe/Jane Six-Pack. His proclivities are to maximize profits for a small circle of billionaires and family members. [Sidenote: I listened to a podcast this morning in which the commentators were unable to understand why so many billionaires “sucked up” to Trump after his 2024 election. It is not difficult to figure out. They simply wanted to be in the circle that benefitted from Trump’s grift.]

Nevertheless, the macro influences the micro, just as the micro influences the macro. But the micro has to be in aggregate to force macro changes. The macro does not. Shit rolls downhill. It is important to keep this in mind. The finance channels focusing on the macro movements in money, bonds, gold, weapons sales, etc., have more relevance in our lives than you think. Thus my orientation towards finance in my research, which I then use to create alternatives in preserving assets for my partner and myself.

In evolution by natural selection, small random changes aggregated over time produce speciation. This led to the famous dictum, “Macroevolution is just microevolution writ large.” Stephen Jay Gould famously disagreed with this and many evolutionary biologists have taken to parsing this question in various ways to sort of “get around” the controversy. One way is to differentiate. Microevolution is adaptation. Macroevolution is speciation and divisions of the taxonomic hierarchy plus the development of complex organs like the eye. It should be simple to see that once you climb the complexity ladder beyond the individual’s variation, you need a more inclusive definition. The language requires it and mirrors the process.

At the structural level, taxonomy itself becomes a macro focus. At the micro level, we can just say, “Shit happens and sometimes it sticks.” The wolf is not thinking about making the elk faster by taking the weak ones. He/she is just out to get something to eat. The greedy individual bankers and brokers are not really working at the macro level. They just bought into a System already established and are working within the parameters of that System. Elon Musk, Jeff Bezos and Mark Zuckerberg have never questioned the System in their life. They are pikers compared to the slew of people standing up against the most powerful government in the history of the world and saying, “NO!” to the war in Iran and “NO!” to the genocide in Palestine. And yes, many of the finance types are fascinated by the System and study it all their life. And they do have something to say as insiders to me, the outsider. But as the greedy individuals all work towards the same goal, they aggregate into the macro. It is not a conspiracy. They all just think the same.

In that light, I recommend a video I listened to this morning while out in the garden. This channel is called The Real Story With Michelle Makori. Makori is a journalist who has been around for some years and is pretty damn smart. She also does the research. Makori is what is called a “gold bug” but also a big fan of Bitcoin. She also has a pro-Amerikan bias but don’t let that put you off. She is still worth a listen. Here is the link.

The subject of this video is Hank Paulson’s recent warning about the US bond market. He is calling for an emergency “break the glass” plan in case the US government cannot sell its treasuries, leaving the government itself to buy them. In a nutshell, government bonds (treasuries) finance government functions, especially war. In the UK, government bonds are called gilts. And the UK has a serious problem too. UK 10-year gilts were up to 5% in the last couple of days and are down to 4.938% as I write this essay. US 10-year treasuries are at 4.362%, while the German 10-year bund is at 3.004%, the Japanese 10-year bonds are at 2.509%, and the French 10-year bond is at 3.6248%. These numbers go up and down all day long, but the relationships are about the same because of the interconnectedness of the global finance system. Japan, Germany, and France are relatively stable compared to the US and UK.

When the government is in trouble, investors and wealth funds inside the country are hesitant about buying treasuries. Foreign governments are even more cautious. The US has lost nearly ALL its “full faith and credit” in financing ever since Joe Biden stole $300 billion in Russian assets held in the US after the Ukraine War started. Now, all governments around the world have to factor in what happens if they get up the wrong prong with the US government. China is dumping treasuries, for instance.

But there is another problem too. Since the US is in $39 trillion in debt and it increases by about $1 trillion every 100 days, many foreign and domestic investors are worried about the US government defaulting on its obligations. This is not likely to happen, as a better alternative is to just keep inflation above the prime rate. The upshot is that inflation debases the currency so that bonds are payed back with cheaper dollars. Over time, inflated dollars act as a slow-rolling default. This is the preferred solution but this also means stagflation - like in the 1970s - will be back to bother us all once again. It is not just a deteriorating job market because of corporations using AI to cut jobs, but also the supply destruction of oil being unable to get from the Persian Gulf to worldwide customers. At the individual level, if you don’t have a job OR your wages cannot keep up, your lifestyle will take a hit every day. And of course Paulson, et al don’t give a shit about the working stiffs. They only care that the US government may be in trouble.

Government bonds have been a revolution in funding war since the forced loans, or prestiti, the Republic of Venice first issued in 1172 to fund wars and defence spending. In 1694, William III of England used a syndicate of private investors to purchase debt to fund the Nine Years’ War. This syndicate was granted a Royal charter and became the Bank of England. There is plenty of history behind the use of bonds but now government bonds are integral to keep all functions of the US government going. The problem increases in severity dramatically if no one wants to buy the US treasuries. This is Paulson’s warning. And his solution? Paulson didn’t provide one, but it is probably another bailout, since he was the architect of the 2008 Troubled Asset Relief Program (TARP). But this time - unlike 2008-2010, it is not the government bailing out private debtors, but the government bailing out itself. Can this even work? I have no idea.

Of course, no one in government is suggesting we stop financing wars on the whim of whoever happens to be President - or the President or `Prime Minister in other countries. Nor is anyone in government willing to tax billionaires to pay off the government debt. The answer - in these addled brains at least - is yet another program to bail out profligate government spenders. And it is not just government agencies like the Pentagon that allow defense contractors to inflate the costs of their government contracts. Soon there will be a bailout of the failed AI industry. As many people have said before, “This is privatizing profits and socializing debt.”

What is the solution for us? You know, the people who actually make things and don’t make a living by financialization. We will have to disentangle ourselves from the System. The road in front of us leads to more and more debt slavery. The smart people are looking for alternatives outside of the mainstream. But, since we have the ability to watch YouTube videos at the moment, it is a good idea to listen to the enemy.