Morally Hazardous Bailouts: Installment Payments on an Apocalypse?

No.: 
75

How much time will elapse until California becomes America’s Greece? If the EU thinks it necessary to bail out one of Europe’s most profligate state economies, will the U.S. face the same perceived necessity with one of our wayward state governments? What will happen if the Federal Reserve supports government aid to California like the European Central Bank did for Greece? Will worker relief overshadow taxpayer outrage?

If the U.S. government performs a ‘California as Greece’ bailout, which states become our Spain, Portugal and Italy? Does every American state get a bailout, the most responsible paying for the least prudent? Are state budgetary woes the start of moral hazard’s next chapter? If so, where are the reform era’s incentives for budget discipline? If states are too big to fail now, what prevents them from being too big to fail after bailouts? Where is the end of it? Is it possible that the histories of the EU and the U.S. are beginning to merge into one dysfunctional tale?

The Reforms We Should Have Implemented

In the early stages of the 2008 economic crisis some people, myself included, pointed out at least a half dozen changes necessary for a sustainable American political economy. First, fiscal responsibility for public and private entities would be essential. Second, excessive debt would need to be destroyed, such debt destruction shifting ownership claims upon societal wealth. Third, a cultural and educational rebirth would be necessitated, organized by a new sustainability ethos. Fourth, a new financial architecture for capitalism would have to be conceived, articulated, designed, and implemented. Fifth, the ill-gotten assets of the high finance wealth class would have to be recovered for the public interest, otherwise the system would become increasingly illegitimate. Sixth, a new morally honorable market environment would need to develop in favor of those who provide meritorious contributions to the sustainable public good.

We’re now far enough into a so-called economic growth recovery that some observers see momentum building. Yet, we have failed to operationalize even one of the expedient correctives. Are we deluded? We kick the can down the road by inflating our money supply (we’ve doubled it since 2007). We borrow like there is no tomorrow (thus taking the best of tomorrow away from our offspring). We monetize runaway government spending, thus frittering away the prosperity gains that business efficiency enhancements would secure for the middle class in any fair system. Our “recovery” is little more than madness! We’re angry with politicians but we persist in our ways.

Our deeds testify that these are our “end times.” Where there is no repentance from evildoing there can be no forgiveness from heaven. Every good tree brings forth good fruit. Bad trees are ultimately chopped down and burned. The handwriting is on the wall: This system’s days are numbered.

Jon Markman speculates that major international bond investors see the future more clearly than stock market investors, for they “savaged the debt of nations that have pledged to pay for the [EU] bailout” (May 12, Marketwatch). Still, bond investors continue to buy U.S. government debt. Like equity investors, they believe their brinkmanship abilities are great enough to allow them a last minute exit from crumbling markets, their pockets stuffed with speculative riches that their bonds as collateral allowed them to corral.

Viewed from a perspective of aggregate effects, this is lunacy. Where is the foresight to help protect the nation from a tragic outcome? A tragedy of the commons now unfolds. It is every man for himself, the public interest be damned. While many will escape enriched by market chaos, most will find their gold no fortress against the worldwide calamity that ensues. Societies come unwound when self interest becomes ruthless and short-sighted. It is the judgment of heaven as much as the consequence of sin. Nations reap from the seed they’ve sown.

Hindsight Will Be 20/20

The congressional decision to bail out Wall Street in 2008 will someday be viewed as one of the half dozen worst political decisions in U.S. history! This horrendous decision will have its place alongside of the failure of the Constitution’s Framers to insist upon a qualified balanced budget requirement twenty years after the document’s ratification. It will be viewed with the same moral repugnance as the failure of the Constitutional Convention to bar slaveholding in all U.S. territories (and in the 13 original states, too, as a Jubilee remedy effective fifty years after ratification). Robust moral resolve and courage would have allowed both improvements to the Constitution. Failure to secure these prudent laws produced calamitous results. Tragically, the Wall Street bailout will create even more trouble because its immorality and illegitimacy are profound. The bailout serves as the catalyst for Leviathan’s world control.

In 2008, the Universal Sovereign kindly provided America a doorway to escape from the beast. The exit from impending disaster would require the U.S. Congress and the citizenry to repent of waywardness. Repentance would require accountability and an acceptance of a very hard recession as the debts of prolonged profligacy were worked off. Furthermore, a moral awakening would require society to facilitate the market’s transfer of Wall Street’s ownership share of national wealth to morally respectable hands. This serendipitous opportunity would have laid waste to the wealth claims of the beast’s generals, colonels and captains, such claims destroyed by free market mechanisms while preserving largely intact the underlying wealth of society.

Granted, economic disruptions would have resulted from the legislation necessary to transfer the banking functions of Wall Street to new banking institutions set up under the control of reputable Main Street firms. But with nationwide confidence building from the birth of a new financial architecture, the near-term costs of repentance would be bearable — especially in light of magnificent long-term benefits.

The Price Of Our Lack Of Vision

As it worked out, repentance was not for us. Instead, we made an installment payment on an Apocalypse — the only remaining force strong enough to bring down the beast now healing from its deadly wounds. It was not fate that made us refuse Providential help. It was national hardness of heart, widespread covetousness, greed and the spiritual blindness that accompanies habitual sin and hypocrisy. Whatever comes from God’s hand in days to come is only what we’ve brought on ourselves.

Whether this nation realizes it or not, we’ve bowed the knee to worship the finance beast, thus sealing an onslaught of plagues for our destiny. We’ve been sold to Pharaoh and enslaved in Egypt. We face skullduggery without end, for no sooner does one false prophet step aside then another one steps forward speaking like a lamb but having the policies of a dragon.

When the Treasury Secretary spoke to the U.S. Congress in 2008, he spoke with a forked tongue. The Secretary declared that an economic apocalypse would come if government did not bring American taxpayers to bankers’ rescue. Not so! It was the ill-gained wealth of Wall Street that teetered in the balance. But our country was taken in, for we took insufficient time for prayer and reflection. We did not deliberate in the house of God with the scripture before us. Instead, we reached forth our hands to the forbidden tree. We capitulated to the idea of trickle down wealth. We sold our national birthright for a bowl of porridge. And what did we get in exchange? No sooner did Wall Street have the Treasury’s pledge and new credit from the Fed, then elite traders intensified their predations upon the nation’s markets, racking up bigger profits than before. What corruption! How can a beast be more clearly marked?

This is not the first time a beast’s marks should have been discerned. Often in history the careless have failed to take heed. Indeed, John Bunyan wrote his highly perceptive allegory, “The Holy War” (1682) as a warning that God-fearing people should not defer to the arguments of the wicked but should scrupulously ferret out the truth. Sadly, in Bunyan’s book, the people inhabiting the town of “Man-soul” are so engaged by thoughts of prosperity, entertainment and gaiety that they fail to take note of the dragon’s disguise. So it is today.

Consequently, our country’s laws are riddled with corruptions that allow the devious to triumph over the meritorious. Yet during the 2008 bubble, the unfailing providence of God allowed the wicked to fall into their own snare — the leverage by which they intended to win the wealth of the world becoming a potential noose for their own hanging. Unthinkingly, we removed the noose from their necks — we defended them from timely judgment. We made the wicked into victors and offered ourselves as their captives. Even more, we continue to worship in their Wall Street temples. What is to be done for such a foolish generation?

‘Start the clock for a lights out era’ for America, Europe and the world — not next month or next year but soon enough to punish the guilty generations. When the flogging comes, remember: we’ve earned our stripes. But go read the good book: The story does not end with the punishment of the wicked. It begins afresh with the evolution of a new age of goodness. That news is incomparably better than an EU bailout or the prospect of accelerating growth.