Dear American, From: Minister of the Treasury Paulson

Yes I did. Obviously, she´s not the slightest bit embarrased!

That´s exactly the type of person who is typically mayor of small towns in Lower Bavaria. :D

Palin is a source of some 1A entertainment, but she will not matter. Nor will gun control or abortion. Not even the "war" (it´s an occupation, not a war) in Iraq. Who would have thought that two weeks ago?

What matters now is what´s going on at Wall Street. I made a remark here some time ago that I think it´s possible the American Economy will go down Argentina-style. That doesn´t sound so awkward any more now!

We don´t know. Obviously, a ship like Argentina goes down pretty fast, because it´s small. What we see though is the same in slow motion. We don´t know if and when it stops, but we can expect that nobody will be doing anything to stop it. The government is defunct. Bush has not even support from his own congressmen. By the way, where is he?

People are obviously anxious. Huge banks are going down almost daily. Wall Street is in panic mode. Are the pension funds safe? Is the ship really sinking, along with them? That, and nothing else is what matters now. Even more so because nobody seems to have a convincing answer (hey, not even Santa Klaus!).

I think you can toss all the polls into the wastebasket. They are worthless now. McCain wanted a game-changer, here it is. I´m still confident about Obama´s chances though because it´s the sort of game-changer McCain could not have wanted. The Dems seem to cope with the situation much better than McCain, too. Quote McCain: "In a race increasingly centered on the economy, ... I still need to be educated." The Dems should play this clip in infinite loops now. :D.
Unfortunately there is no video footage of that quote: "Some of our bankers had shown themselves either incompetent or dishonest in the handling of people's funds. They had used the money entrusted to them in speculations and unwise loans." Roosevelt said that. If you ignore your history, you´re condemned to repeat it.

By the way, Michael Moore makes a very good point: The root of this crisis are people who can´t pay their debt. Most people who are broke have been ruined by their medical bills. Maybe this crisis wouldn´t have occurred if America had a decent health care system, like all other civilized nations on earth (and even a few uncivilized ones).

Palin Claimed Dinosaurs And People Coexisted

Not only that:

Soon after Sarah Palin was elected mayor of the foothill town of Wasilla, Alaska, she startled a local music teacher by insisting in casual conversation that men and dinosaurs coexisted on an Earth created 6,000 years ago

Religion - the greatest source of 1A entertainment. Hoping to find "Religulous" on Youtube this weekend.

Hard to imagine what things would be like if that happened.

It is happening - that´s my point. The difference is only that the whole blow-up happened in a matter of days in Argentina while it is going on in America since last year. Other than that, it´s pretty much the same IMHO - a debt crisis and an infarction of the financial market. The open question is: "will it stop before the entire economy blows up?". Much of the economy is in trouble already: it´s hard to get bank loans in america these days. Remember that one?. One year earlier Amy would have gotten any amount she´d ask them for. I guess that sort of thing is happening everywhere in America now. No credit => no investment => no new jobs.

But there´s hope for Wall Street. Ask for advice in Argentina. They solved the problem. Hugo Chavez bailed them out! :D

Did he say that after the crisis?

Yes, I read it on his website. I can´t find it in a hurry now. He opposes the bailout, which is stupid IMHO. If you try to make sense of the whole matter, read this blog.

I'll check it out. I don't know enough about economics to know whether the bailout is a good idea or not. Sounds like the taxpayers are getting robbed either way :)

From what I gather, it´s not very complicated. Banks have assets and debts. A healthy bank has more assets than debts. The difference is the net worth of a bank, owned by the shareholders.

What happened is that the value of much of the bank´s assets declined. When a bank reaches the point where the assets are less than the debts, people start to withdraw their deposits because they know the bank won´t be able to pay back all deposits - nobody wants to be at the end of the queue. That´s what causes the panic - the bank runs out of liquidity very fast. The bank goes down.

The Paulson Plan allocates 700 billion to the treasury to buy the bank´s assets at a price which is above the market price. This provides the banks with additional liquidity and the customers with confidence that the banks won´t run out of money. That does not mean the 700 billion are all lost - the treasury buys assets which are arguably worth more than their current market price. With some luck, treasury can even make a profit by selling those assets later when the markets have recovered.

The most important part of the bailout is that it buys time. You´re in the middle of a presidential campaign and the current administration is defunct. It is important to buy enough time. Enough to keep the circulation going until a new doctor arrives on January 20, 2009. Only then the real work begins!

The better plan would of course be not to buy bad assets but to take over troubled banks - nationalize them! When the bank´s debts are higher than their assets they are technically worthless for the shareholders anyway. This would only be fair - the shareholders sit in the board of directors and had to approve all those risky deals. They did approve out of pure greed. It´s their fault alone and they should end with empty wallets! That´s what we do in Europe with failed banks, by the way. Anyway, the Dems know Bush would veto such a solution. Those shareholders are his cronies - he is not going to let them down. He would rather let the whole economy go down burning. That is why the Dems tried the less radical path - make a few amendmends to the Paulson Plan and buy some time for $ 700 billion...

If you do nothing - nobody knows if the patient recovers on its own or will get a heart attack. Exactly that happened in 1929, which made Roosevelt´s job much harder.

You are absolutely right that the taxpayers = electorate now get the bill for their faith in the religion of unfettered markets. They will pay either way. If they don´t learn it the hard way they´re a lost case.