by John Galt
July 24, 2012 22:00 ET
On CNBC today, Rick Santelli let loose with another epic rant:
Why is he so disgusted? Perhaps it’s idiotic ideas like this one presented by Steve Clemons and Richard Vague in The Atlantic on July 22nd:
Ah yes, the grand social experiment proposed by Marxists for over a century to eradicate the greed and sins of capitalism instead of punishing the stupid and inept who made decisions that they want the rest of us to pay for. Within the article linked above, the idiots make the following statement:
The best alternative for reducing debt levels without the economic contraction caused by paydown (as during the Great Depression) is restructuring loans.
Dollar for dollar, a restructuring of problem loans — with appropriate moral hazard consequences intact — would provide as much or more stimulus than government spending, without the GDP-suppressing effect of additional government debt. A trillion dollars of private debt restructuring of loans could provide as much stimulus as a trillion dollars of government spending.
In other words these authors may have missed the memo or perhaps already ignored the consequences of the idea they present. First and foremost, the TARP program allowed banksters to hide their defaults under the protective cover of the taxpayer, who in the end has restructured the debts of companies like AIG, General Motors, General Electric, etc. instead of allowing them to fail and new, stronger corporations to emerge and purchase those failed company’s assets.
Then there is the restructuring at gunpoint created by the government itself to allegedly “save” the housing industry. The HAMP program which was designed to restructure problem mortgages has already resulted in a massive re-default rate far beyond the original program design yet the banks are being forced via regulatory edict to continue engaging in the futile exercise instead of allowing the American economic system to work as designed with default and reduction of losses via reinvestment. Apparently the idea of “failure” is far more terrifying than enforcing the rule of law and making up the rules as one goes along is much more fun anyways.
Which is why their final idea is even more insane (from the same article):
In ancient times and as recorded in the old Testament of the Bible, the Land of Israel forgave all debts periodically, and the economic basis point for lands and slaves was reset in what was called “Jubilee.”
Perhaps the economic system we have built today that seems addicted to ever higher levels of private sector debt, not to mention public debt, needs a modern Jubilee as well — and whether they are working Americans facing impossible economic hurdles or Greek citizens facing a future as permanent serfs in a Germany-dominated Europe, finding a way to restructure and write down debt held by financiers and banks is the fastest and most effective way to bolster healthy economic growth.
No, perhaps a better idea is to allow Americans to learn how to lose again so they can remember the sweet taste of victor when they succeed. This would be a good lesson to learn so Mr. Santelli’s head will not explode on the air one morning and the system our Founding Fathers envisioned might work to protect everyone’s rights and enforce the law equally for and against all citizens and corporations across the land.