“If the Venezuelan government, for example, approves a law to protect consumers, they say, ‘Take notice, Chavez is a tyrant! Or they say, ‘Chavez is regulating prices. He is violating the laws of the marketplace.’ How many times have they criticized me for nationalizing the phone company? They say, ‘The state shouldn’t get involved in that.’ But now they don’t criticize Bush for having nationalized . . . the biggest banks in the world. Comrade Bush, how are you? Comrade Bush is heading toward socialism.”

But that may take some time to unfold.

[AP October 14, 2008] President Bush on Tuesday announced a $250 billion plan by the government to directly buy shares in the nation’s leading banks, saying the drastic steps were “not intended to take over the free market but to preserve it”.

Meanwhile the self-described “Maoist” political economist Raymond Lotta is quoted in the mainstrean news (AFP):

“It’s not ’socialism for the rich,’ nor a rescue for the people. It’s emergency capitalism for the rich, and more brutal capitalism for the rest.”

The “huge” gains Wall Street was supposedly “headed for” have, on the second day, petered out into bargain hunting and a moderate gain so far. Not that Wall Street has ever had much to do with the underlying economy, in good times or bad.

Back the ranch, as was eminently predicable, oil is now on the rise again.

Apparently the Federal Government and American economists do not grasp simple economic recursions?

NEW YORK(Reuters October 13, 2008) – The Dow Jones industrial average surged more than 400 points in early trading today as investors rushed into stocks after eight sessions of devastating losses, hoping that the stock market is finding some footing following pledges by governments to further aid the banking sector, including plans by the Treasury to buy U.S. bank stocks….

Or should it be called “escalation”?

Paul Craig Roberts, A Solution To The Financial Crisis

http://www.vdare.com/roberts/081009_solution.htm

I very seldom disagree with Paul Craig Roberts, and hardly ever on matters of fact. Some of his solutions in the article quoted above are well-aimed. That throwing $700 billion at the banks and financials, for example, is a waste of money, and that it should be thrown at the borrowers instead, which will stabilize some of the paper.

The man is an honest broker, clear-headed, and extremely intelligent.

Here I disagree on two points.

The status of USD as the world reserve currency is long gone and will never be recovered. The Europeans, whatever they are saying, will now go their own way, slowly but also steadily. The Euro is sounder than the dollar, despite the last few days. Nothing of that will be solved by attacking it or by currency manipulation.

Berlusconi just mentioned very quietly that Bretton Woods may have to be reworked.

That is handwriting on the wall. That no one in the US seems to be paying attention is irrelevant to what the Europeans will do.

Oil is now the virtual world commodity currency, and the USD seeming to recover is a sign of the same pattern at work as it was in regard to oil prices going up in USD.

For that reason oil has to be nationalized, or some equivalent, whatever the price in the present contraction.

Too, Roberts mentions “racial” preferences in lending in regard to the collapse of subprime. Whatever one reckons these to be, good or bad, they had little or nothing to do with the collapse of subprime, and getting rid of them will likely accomplish nothing one way or the other. On the other hand, there is a small possibility it just might make things worse just now.

This is complex is partly connected to conventional credit models.

Who has the money AND the “credit rating” to buy some of the housing now on the market?

I leave that question unanswered for the nonce but it is central, whether you like the answer or not.

At any rate, at the moment the issue is mostly academic.

Roberts should put into his model two central facts, and one important interpretant.

The two facts:

(1) January 2008 oil = $19 per barrel
(2) July 2008 oil = $147 per barrel

The interpretant: these two facts are more a sign of the collapse of the dollar than of the rise in the price of oil due to supply and demand.

Everything Roberts says about the cost of war, the lack of US exports, and so forth is all valid.

One other point–which falls under the heading “innovation and creativity”. Throwing “money” at US producers of buggy whips will not solve the balance of payments problem.

It will only fuel a false and temporary expansion, that will leave things even worse than before.

Nota Bene: the only thing “huge” at this point is what is supposedly “headed for”.

With oil down because of world-wide economic contraction, and the Euro under attack, many will soon also talk of the “resurgence” of USD.

The word I used for oil prices in USD at the end of July, and subsequently, was “plateau”.

http://news.yahoo.com/s/ap/20081012/ap_on_bi_ge/eu_europe_crisis_summit;_ylt=AsNwylQzb2.4X9hdzTCEgSGs0NUE

Note what is said about Ireland’s bank deposit guarantee particularly.

If this is part of a covert British and US attack on the Euro, it will backfire, but it will take time.

The US is running out of counters.

[AP Hunt October 10, 2008] Bush said he understood how Americans could be concerned about their economic future. “That anxiety can feed anxiety and that can make it hard to see all that’s being done to solve the problem,” he said.

But despite a relentless sell-off that has seen the Dow Jones industrials plunge 20 percent in the past seven trading days, Bush said, “We are a prosperous nation with immense resources and a wide range of tools at our disposal.”

Yes, indeed, the US is a nation of many, many tools no doubt of that.

Not only at the highest levels–in politics, in finance and economics, in the military, in the universities and so forth–but also among the general population, who are the tools who made the greater tools what they are today.