A $700-billion bailout
The current financial tsunami inundating the world stock markets following the collapse of financial giants does affect the Philippines, regardless of the denials and counter claims by government and local financial experts.

The Philippines is extra-vulnerable and sensitive to any financial movements and shocks, particularly in the US economy. In the first place, our financial system is merely a “footnote” in the overall financial system that dominates the world. London, New York and Tokyo constitute the three pillars of the present world financial system that makes and unmakes nations and the world order. No doubt, the Philippine financial system is not only “jittery” in the face of this collapse but also “tottering” as more revelations of exposures unfold.


The collapse of Lehman Brothers, Merrill Lynch, AIG and HBOS (to name a few) is a simple indicator of the nearing collapse of the western financial system that now threatens the whole world. The biggest consideration is a bailout of the financial system that seems to disintegrate before our very eyes.



Is this a classic case of simply “postponing” the inevitable collapse of the western financial system similar to the total collapse of the USSR almost 20 years ago?


The New York Times (September 21, 2008) speaks of the $700 billion bailout proposed by Treasury Secretary Henry Paulson as “bold” action to meet the current financial crisis. There are some sectors that disagree and criticize the planned bailout. In lieu of the bailout they propose a radical "freeze” of all the speculative paper, for purposes of auditing. The Economic Intelligence Review (EIR) goes against any kind of bailout on the basis that if government does, it loses control over the situation.


The EIR claims that "The nation is being screwed. These guys don't have anything coming to them. Poor people have been denied health care because of these swine. Let's start frog marching them off to jail, where they belong."EIR claims that Paulson's bank bailout is not bold and innovative action to the financial crisis but the “biggest swindle being pulled against the people and taxpayers”.


The plan, presented by Treasury Secretary Paulson and supported by Fed Chairman Ben Bernanke, President George W. Bush and a group of international bankers, would transfer most of the enormous losses incurred of the global financial system, from the books of the banks to the Federal government, and the U.S. taxpayers.This scheme is being marketed to a frightened public as a "bold'' plan to "solve'' the financial crisis once and for all. It is really the biggest theft in history, an act of monumental stupidity which will destroy everything in its path - the economy, the nation, and the people. "This is the biggest swindle ever pulled,'' EIR said. “It is absolute insanity. The public is being duped.”


The proponents of the “freeze” solution say that nothing Paulson has said is true – “it is all lies designed to dupe Congress and the American people into believing that this gigantic ‘rip-off’ is both necessary and in the public interest, when neither is true.” The lies began well before Paulson, when we were told that finance, not production, was the road to wealth. For the past four decades, we have seen the systematic dismantling of American industry and agriculture, and the turning of our economy into a giant casino.


Our banking system has been turned over to the speculators, and we have watched a relatively small portion of our population get rich - some obscenely so - while a growing portion fell into poverty, and others were pushed over the edge. Every protection put into law to stop such looting has been systematically repealed, including the Glass-Steagall Act which forbade commercial banks from engaging in investment banking. Now that system has collapsed, and we are being told that the people must bail out the crooks.


The final phase of this collapse began last year, with the mythical "subprime crisis,'' a deliberate misnomer. Then this "subprime crisis'' somehow morphed into a "credit crunch,'' infecting an "otherwise healthy'' banking system. It was, from start to finish, a lie carefully constructed to support the ultimate demand for a bailout.According to EIR, here's what really happened. It all started with the banking system.


The banks built up a huge derivatives bubble in the 1990s, a pyramid scheme which constantly needed more money fed into its maw to keep it going. One of the prime sources of fuel was mortgages, which were used to spawn mortgage-backed securities and even wilder forms of casino chips like CDOs.


The more mortgage money came in, the larger the profits that could be made from speculating in the securities, yielding more money for new mortgages. It was this securities machine which drove housing prices - and the mortgages on those houses - into the stratosphere. However, the machine worked so well that it drove housing prices beyond the reach of many Americans, so, in order to keep the mortgages flowing in, the banks began to relax loan standards, and in the end were selling homes to people who could not afford them, just to keep the game going. It finally got to the point that prices were so high, that even with the lax lending standards they couldn't keep the game going, and the whole house of cards collapsed.


The subprime loans collapsed first because they were the shakiest, made at the top of market, so the banks painted the subprime lenders and borrowers as the villains, as a way of covering up their own role. It was a classic "blame the little guy'' scam.


Now we see Paulson asserting that the banks have been infected by this "housing crisis'' and that in order to protect the American people we must launch the biggest bank bailout in history. But it was Paulson, a former investment banker, and his investment banking buddies and their predecessors, who created this mess in the first place, and are now demanding that they be saved from the consequences of their folly, and handing the bill to the people they have been victimizing for decades.


The foxes are demanding that the chickens pay for cleaning up the blood in the chicken coop.

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