Paulson plan: useless and harmful to democracy
by Maurizio d'Orlando
The 700 billion dollars approved by the U.S. Senate and House to rescue the American financial system resemble a "sheriff of Nottingham" plan: take from the poor and give to the rich. The plan is harmful, and above all insufficient. Commercial debt, the national budget, and consumption must be reviewed, and especially the monetary system. The silence of the Catholic world.

Milan (AsiaNews) - After approval by the U.S. Senate, the Paulson financial rescue plan has also been passed by the House of Representatives. Initially it was supposed to be for 700 billion dollars, but this was raised to 850 billion - an increase of 21.43% - as a sort of gratuity to satisfy the needs of lawmakers who are up for reelection. In order to rescue banks, insurance companies, and financial institutions from the consequences of their stupidity, each person will pay 2,868 dollars - for now - out of a population of about 296 million inhabitants. It is worth emphasizing that "each person" means every American resident, while it is obvious that the actual contributors will be far fewer.

Taking from the disenfranchised, the elderly, and the children in order to remove the powerful from the consequences of their lust for power is certainly not a new solution. It is the same one applied by the sheriff of Nottingham, in the modern version of the popular English story of Robin Hood. But "Nottingham" finance is certainly not the solution.

Economy trumps democracy

At first, lawmakers rejected the plan supported by the president, the treasury department, the federal reserve, and the leaders of both congressional parties. The plan was and remains extremely unpopular, with almost 9 out of 10 Americans either opposing it, or angry about it. Because two thirds of lawmakers are facing reelection, they had to show some consideration for the thoughts and feelings of the overwhelming majority of Americans. The United States is a multiethnic country, and democracy is its banner, and moreover the founding ideology of the country. For this reason, democracy is much more than just one of the various possible systems of government for America, it remains the deepest connecting factor for the descendents of those individuals who for its sake - more than for personal economic success - crossed the ocean and abandoned their country, people, and traditions. But democracy is founded on elections, and elections cost. The result - the approval of the Paulson plan, with an additional 20% of votes - was predictable: few members of the House of Representatives can do without the support of the financial and credit system, or do without the support of major companies. These as well, in fact, and not only the investment banks, are for the most part deeply in debt. So all of these companies find themselves in the same deadly embrace together with the financial system. Many voters are also deeply in debt, and their behavior is conditioned, or more accurately intoxicated, by the financial system. It has not shown up yet, but if the recession continues, it will be impossible to conceal the huge bubble of debt in which American families find themselves: credit cards, auto leases, school loans, and other forms of consumer credit.

After their jawboning and superficial adjustments, the representatives of the people, against their own wishes and "out of a sense of responsibility," have approved "Nottingham" finance, which the "sovereign" people disapproved of so intensely. In their initial chattering, the representatives of the people may have thought they could salvage the appearance and the honor of the flag, democracy, the system of government in which the people are said to be sovereign. We will see in the future if this will be the case, or if this affair will mark the end of egalitarian and democratic modernity.

The oracles of the economy, almost a religion

As for the effectiveness and results of the Paulson plan, Alan Greenspan, probably one of the people most responsible for the bubble, said in a speech on October 2 to the law faculty of Georgetown University in Washington that the measures approved by the American congress will reestablish confidence. According to Greenspan, it will make it possible to emerge soon from what he calls "the type of wrenching financial crisis that comes along only once in a century." The former governor of the Fed says that vitality will soon return to the system.

Of course, the cyclical nature of the financial markets and of the economy have long been observed and studied, in some cases in a convincing and reasoned manner, as in Schumpeter and Kondratiev, for example. In other cases, the cyclical nature of the financial markets has been the occasion for a sort of predictive financial astrology, a modern form of the Pythian oracle, the priestess at the shrine of Apollo in Delphi who provided the answer from the divinity. Modern divination is based on price depictions, and with the name of "charting," is endowed with scientific value, even when it abstracts from any reasoned analysis of economic events that should be the basis of the economy and its underlying financial markets. It might seem strange, but even much of "secular" finance, which looks with skepticism at Christianity, and especially at Catholicism - considered a form of irrational and anti-scientific superstition - has for some time entrusted itself to this form of modern divination. What goes down must come back up, in a constant flow determined by something inscrutable that the prophecy of the chartist is tasked with uncovering. Invoking the cyclical nature of the markets is comforting, because inscrutable fate removes man and society from specific responsibilities. It may be that in the short term, the "Pythian"Greenspan will also see a confirmation of his predictions, but this time the results of the comedy threaten to be tragic.

In reality, the Paulson plan, although it is enormous, is insufficient to confront the real dimensions of the problem, and serves only to gain a couple of months until the inauguration of the new U.S. president and the new congress. Then the emergency of these days will reemerge in all of its brutish and monstrous dimensions. This is not another prediction from another malevolent or pessimistic prophet, it is only a simple observation. Reading the data from the end of 2007 from the International Settlements Bank, it emerges that the total value of over-the-counter financial derivatives - meaning that they are unquoted - including those on interest rates, currencies, and the infamous CDS, comes to about 700 trillion dollars. That is 1,000 times the amount of the Paulson plan, which, subtracting the incentives, remained at 700 billion dollars. By way of comparison, updating the figures from the previous article (cf., 30/09/2008, Depth of the abyss of economic, social, political chaos), we note that the 850 billion dollar plan is equivalent to 6.15% of U.S. gross domestic product, according to the 2007 figures from the World Bank.

Crisis of capitalism, or crisis of the system

The numbers speak for themselves: the "Nottingham" iniquity - ,361 per capita, plus the incentives, at the end of the day, is only a redistribution of income according to political criteria - cannot be solved within this system, because it is the very system of secular or secularist modernity that is in crisis, in both the political and economic realm, and not only in America. It is a mistake to think that we are only in front of another "capitalist" crisis, a lack of regulation, of laissez-faire thought and policy on the "right," of the Republicans in power with George Bush. Easy credit, "structured" debts, "subprime" loans given to anyone who wanted them, even if they were unable to pay their debts, began with the presidency of Bill Clinton, and for almost half a century the United States, with both Democrat and Republican presidents, has at the same time produced foreign trade deficits and budget deficits, financed by the savings from other parts of the world. In other words, the United States has long consumed more resources than it has produced domestically. Support for consumption through deficit spending is at the heart of the Keynesian approach that in Europe is usually branded as a "leftist" measure, and in America is generally defined as "Democrat." Right and left, Republicans and Democrats therefore share the responsibility for the system in which the "Nottingham" iniquity constitutes an inevitable but useless consequence. The very dimensions of the money involved suggests that the problem is elsewhere, in the criteria for the legitimacy of a sovereign act, the Issuing of money. What is astonishing in this context is that this problem is hardly discussed in Catholic circles. What should make us think is not only the "Nottingham" iniquity, but also and above all the fact that money and the sovereignty of public administration are part of our daily experience.