The Public-Private Partnership

Now that the treasury secretary, Geitner has revealed details of rendering good the bad financial assets clogging the lines of credit, how will the revaluation of these bad assets lead to economic recovery when the fundament, their underlying value, is still losing value?

That will be by government subsidy.

The difference between what the return on one dollar of the public sector purchase will bring and what a private sector purchase will bring gives value to the bad assets by the public sector subsidizing the private sector. This defines the "partnership."

Given the distribution of the benefit and the possible detriment, the relationship of this public-private mix is better described as a hierarchical subordination of value.

The private sector's dollar is considered more valuable because the public sector has the power (the value) to change the rules ex-post-facto and apply bills of attainder that will require legal action to prevent or reverse. Keep in mind, however, that these possible public acts would likely be reaction to public detection of the private sector's usurpation of value and to replevin the value.

Since government is considered to be THE absoute power that needs to be contained and checked, the object of distrust, despite the constitutional limitations, its dollar is discounted to reflect the possible detriment to the value of the private sector's dollar. Thus, the subsidy is considered by the treasury to be a necessary condition for economic recovery, and it is the model of political economy that made the assets to be cured bad to begin with.

If the public sector cannot be considered trustworthy, and with the private sector proving untrustworthy without close government regulatory accountability, this partnership is doomed to a marriage of primal, fundamental discontent. It is the formula for volaility, not stability. For the trageur, it is an arranged marriage made in heaven. For the taxpayer, it is a marriage made in hell.

The positive valuation for financial equities will be short lived. The previous resistance of 7500 on the DOW is likely to hold, being overbought beyond that, because the treasury plan to subsidize the bad assets does not support the fundamental value of the assets directly, but is likely to be the stimulus for short term trage on the assets as the value trickles down. The dollar will lose value and the price of commodities will rise to support the deflationary trend.

The Great Recession?

We are hearing that the economic crisis we are now experiencing is unprecedented.

No.

What we are experiencing is classical economic crisis, easily predictable, entirely preventable.

If we do not take preventive measures that treat the causes and not the effects, we are looking at a Great Recession, not a depression.

While The Great Depression brought the value, the legitimacy, of capitalism into questionable verification, the organizational means of consolidated capital and markets to the ends of consolidating wealth, and power, has been maintained as an economic efficiency that just needs technocratic adjustment (adjusting for the externalities, like our current "toxic debt" that needs to be managed into a detriment for The People by "socializing" it).

This is where the "unprecedented" attributes are to be found. The treatments we see being implemented are symptomatic and neo-classical--they are new, reinventions of the problem in the form of new solutions and mired in complexity to "appear" innovative and thus effective.

For example, the Fed's decision to buy commercial paper is unprecedented, but it does not solve the problem. Rather, it makes the problem--leveraging financials (clogging the credit market) possible by indirectly buying the bad debt it produces and replacing the loss (the consolidated gain receiving the lowest tax burden) with newly printed money (electronic credits). This is called, monetizing the debt, and in the current case is just an extension of the leveraging scheme (the problem). It is a neo-classical economic technology that keeps the organized means of power from being verified as inefficient by indirectly expropriating value from The People and make it look like they are being "rescued." It is, in keeping with the conservative modus operandi, a fraud.

Fraud is a crime against a civil society, and because the problem is a lack of a free and unconsolidated marketplace that sanctions the frauds by denying them access by operation of collective action, collective will, without threatening economic collapse, these criminals must be prosecuted in a political forum of legislative and judicial procedure.

We need a strong executive that will apply corrective policy directly to the causal factors.

Many economists incorrectly evaluate Obama's advocacy of a more progressive tax code as deficit prone. It is not. A more progressive tax code is deficit averse because it taxes the wealth where it is idled (illiquidity) and puts it to work where it is needed, with The People. The result is both economic stimulus and less need for government, and less spending these economists say Obama is not accounting for, from a reliably robust revenue base that will benefit the rich, but without the all-important deprivation of The People that makes them feel powerful, causes the need for government, and that is nothing but a complete lack of moral intelligence.

A Great Recession is no one's self-interest. Neo-classicism is in means, not ends.

Obama/Biden, 2008.