May 24, 2012


How many of us have had to have a crash course in economics in the wake of 2008? I've learned a hell of a lot, but I have the autodidact's insecurity about sufficient knowledge. Here are three items that might illuminate things for us. I've noted Aleix Sal? before in the blog, good stuff.

Decoder ring:
Administraciones p?blicas = Government
Cajas de Ahorros = Savings and Loans
Inmobiliarias y Construcoras = the building industry (real estate and builders)

Hernando de Soto, an interview at Truman Factor:

Look, perhaps the following illustrates everything a little better: when in the year 2008 the financial crisis became evident, Mr. Henry Paulson, who was then U.S. Treasury Secretary, went to the US Congress and said: ?Look, we have found that there is this private money, which seems to represent assets that we do not know what they are, or who really owns them, we?ll call them troubled assets? Well, let?s do the following, we will go to banks, we?re going to ask which assets these are and we?ll buy them.? And he asks the US Congress to authorize an emergency budget of nearly a trillion dollars. And so the TARP (Troubled Asset Relief Program) comes into operation. Three weeks later, this same Mr. Paulson appears before TV and says, ?Well, look, let?s use this money but differently. What we?ll do is use it to purchase preferred shares of banks and, thus, show the public that no bank is really weak and that if they were, there?s the United States government to support them ?we will not allow a bankruptcy.? Naturally, a financial panic was avoided.
But the basic question that I made then was, why did he not stick to the original plan (buy the the assets or instruments that were failing)? And after talking to US Treasury officials and other contacts in the White House I found out the answer: the trouble assets were not found. In other words, none of this private liquidity had been recorded, no one really knows who owns what debt, many of them are failed, and nobody knows which are they. The problem now, both in Greece and in the United States, is that by rescuing financial institutions or countries (in the case of Greece, it will become insolvent soon) we cannot identify how big the debt is or who actually owns it.

Then the big problem we have in the West is essentially an epistemological problem that results in a question of knowledge, the complete ignorance of the many problems we are facing. Hence, the great insecurity. And what is happening is that states are not addressing this problem because, until now, they do not know how to do it without causing panic. Because if we do an initial inventory to find out how many big banks have these troubled assets and how much of it they have, the figure could be so negative that it would takes us to 1930. So they have not found a strategy to sincere the economy and, at the same time, avoid a panic; therefore the patches: they are hoping to go from patch to patch so that in some miraculous way things will get solved, or so they say that John Maynard Keynes said seventy years ago.

If the next sentence causes you to palm your revolver, then please by all means, read the whole thing.

Apparently, the standard model of physics and the economy illuminate one another. In the light of Simiocracia, the current/force/economy is either false or lower than the system configured.

Added: It's time to study the recent Argentine economic crisis.

Posted by Dennis at May 24, 2012 11:16 PM

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