Free Learner

Bail us out... or else

Stock markets were falling today well before the US House voted not to give $700 billion to the banks.  There was not much incentive to keep the markets up, as you'd usually see from the Plunge Protection Team or its banker allies.  Instead, the message was: You vote no, and the Dow gets it.

And, indeed, the Dow had its single worst day ever, crashing 778 points (or 7%).  Emerging markets, European markets, Asian markets-- they've all been trashed.  The FTSE (the London Dow) fell below 5,000 points, which was a psychological blow.  We'll soon be seeing Dow numbers below 10,000, ourselves. 

There is to be another vote later in the week.  The motto is: "We'll just keep voting on this sucker until we get a Yes."  In the meantime, stock markets will continue to falter.

If the bailout does pass (which I expect it will), this $700 billion will morph over time into more like $5 trillion.  Five trillion for Fannie & Freddie, 5 trillion to banks (foreign and domestic) who bought junk mortgages, a trillion a week in fresh new money "injected" into banks by the Fed, and pretty soon we'll be knee-deep in worthless dollars.

I have to say, I do not understand at all why they are bothering with this bailout, when banks can already give worthless mortgage securities to the Fed in exchange for cash.  In other words, WE ALREADY HAVE THIS RESCUE MECHANISM IN PLACE, to a large extent.  The difference is, the bailout bill makes US taxpayers cough up $700 billion, instead of the Fed simply printing up $700 billion in brand new money.  Of course, taxpayers haven't got $700 billion.  The money will have to be borrowed, at interest, from the Fed*.

Ohhhhh... now I get it.  Either way, the Fed is printing the cash to be given to banks, but this way they're getting interest on it.  Mystery solved.

You can understand why someone would go to Wall Street and hold up this sign:

  

*That is, we print brand-new Treasuries which the Fed buys from us using brand-new cash; it costs them nothing to magic the money into existence, but we still have to pay the interest on the Treasuries.  It's egregious state-sanctioned theft, is what it is-- and it has been since it was illegally signed into law in 1913.

California court reverses decision; allows homeschooling

I had put up a post here stating that a California court had banned homeschooling, referring to a September 23 Natural News article.  I knew that we were waiting for another court decision, and I thought that was it.

In fact, the Natural News article referred to the original court decision to ban homeschooling, from way back in March-- but reported on it as if it were breaking news.

Actually, on August 8, the appeals court reversed itself and re-instated the freedom to homeschool which has existed for 30 years in California.  I was camping when this happened, and missed the good news.  As I say, I thought we were still waiting for the next decision.

Many thanks to Hawksbill for pointing this out to me!

In a Washington Times article on the court's reversal, I thought this was interesting:

[T]he Court of Appeal agreed to rehear the case. Interested organizations on both sides of the issue were urged to file friend-of-court briefs. The governor, attorney general, superintendent of public instruction and the California Department of Education all filed briefs supporting the view that parents could home-school under the private school exemption in California [emphasis mine].

According to a friend from California, homeschoolers there can apply for and receive funds from the state, in some cases as much as $1,500 per year.  This is available (at least in some areas) through some sort of school choice or school voucher program, and it represents an economic loss for public schools.  So it's a pleasant surprise that the Dept of Education supported families' rights to homeschool.

RIP HBOS

The Bank of Scotland just disappeared, consumed by a London entity.  It's a little sad.  They had been in existence since 1695.

For that matter, Lehman had been around for 158 years, surviving the Civil War, the World Wars, and the Great Depression.

This should give you some idea of just how serious the current crisis is.

Bailout nation

It's been quite a week already on Wall Street.  On Monday, Lehman Brothers went belly up, and the stock market crashed the most since the 9/11 attacks.  Yesterday, the Fed gave away $70 billion to the banks (referred to as a "liquidity injection" so that most people won't understand that the banks are getting free money).  That $70 billion was on top of the $20 billion on Monday.  And then the country's largest insurance company, AIG, went off the rails, and -- unbelievably -- has been nationalized, as if to prove we are a Banana Republic.

That's right,the taxpayers are now the nation's largest insurance company, and it cost us $85 billion for the honor of being on the hook for all that insurance.  We are also by far the largest, and frankly almost the sole remaining mortgage lender, thanks to the nationalization of Fannie and Freddie.  As foreclosures continue to spiral out of control, just remember that we are the ones taking the hit.  The national debt has just gone up by trillions.

Economics professor Nouriel Roubini now refers to our country as the USSRA, the United Socialist State Republic of America.  He points out:

This latest action on AIG follows a variety of many other policy actions that imply a massive - and often flawed - government intervention in the financial markets and the economy: the bailout of the Bear Stearns creditors; the bailout of Fannie and Freddie; the use of the Fed balance sheet (hundreds of billions of safe US Treasuries swapped for junk toxic illiquid private securities); the use of the other GSEs (the Federal Home Loan Bank system) to provide hundreds of billions of dollars of “liquidity” to distressed, illiquid and insolvent mortgage lenders; the use of the SEC to manipulate the stock market (restrictions on short sales); the use of the US Treasury to manipulate the mortgage market (Treasury will now for the first time outright buy agency MBS to manipulate and prop up this market); the creation of a whole host of new bailout facilities (TAF, TSLF, PDCF) to prop and rescue banks and, for the first time since the Great Depression, to bail out non-bank financial institutions....

This is not capitalism.  I am not even necessarily criticizing the government attempts to keep the US economy from shattering, I am just saying: let's not hear any more crap about capitalism and the free market.  When you're rich and you screw up, you get bailed out, and it's the little guy who pays for it.  When you hear the word "welfare," remember that the vast majority of money spent on welfare is given to banks and corporations, not to individuals.

The media are trying to portray the failure of Lehman as a tough, stern decision by Paulson and the Fed, in refusing to bail them out.  But, in fact, JP Morgan Chase stepped up and has doled out $138 billion to settle Lehman's obligations to other banks and investors.  That's how they prevented a disastrous domino effect when Lehman went under.  Chase is acting on behalf of the Fed, in my opinion. They pay $138 billion and it looks like a private sector solution, and when they run short on cash, the Fed will dole out whatever they need (say, perhaps, $138 billion).  And the Fed and Paulson get to pretend that they stood back and let the chips fall where they may, like good capitalists.  Yeah, well, I suspect things would have been very different had Paulson been the former CEO of Lehman, instead of the former CEO of Goldman Sachs.  How nice for Goldman that they have their man at the Treasury, who was able to arrange for the failure of one of Goldman's strongest competitors.  The amount of money Chase paid to keep everyone calm and settle Lehman's accounts would have been enough to save Lehman, a week or two ago.  But the boys up top didn't want to save Lehman, because they'd worked it all out with Goldman Sachs.

[UPDATE: Yep, the Fed paid Chase back every red cent of that $138 billion.  In short, the Fed bailed out Lehman's clients, though they refused to bail out Lehman itself, which would only have cost them half as much.]

All of these shenanigans mean we'll be printing up loads of brand new money.  Both the Fed and the FDIC are running mighty low on cash.  The FDIC alone will require hundreds of billions in new money... their remaining reserves amount to maybe $30 billion, which is a pittance.

There is $6.84 trillion on deposit in US banks; but banks have only $273.7 billion cash on hand. The banks cannot possibly pay back depositors all their money as only 4% of depositors’ funds are actually available. [source]

Well, THAT can't be good!!  Either they will have to renounce FDIC protections and let bank customers' money evaporate, or they will have to print new money out of thin air.  Likely, they will choose to print.

All that printing means more inflation, as existing dollars get diluted by the new dollars, and dollars decline in value.  We already have 13% price inflation per year; I hate to see what it will look like in another couple of years.

Oh, and by the way, keep your gas tanks full.  It remains to be seen if they can get the Texas refineries up and running fast enough to avoid fuel shortages.  We won't know until next week, or possibly even the week after.

Garden warning

If you grow any kind of hot pepper in your garden and you have kids, make sure to frequently remind them which peppers NOT TO EAT.  Tristan bit off the end of a fire-engine red cayenne this evening.  He is okay, but I feel like I've been through one of those Poison Control Center directions: Flush with cool water for 15 minutes.

On the positive side, he didn't throw up, and I didn't panic even though he was panicking.  Poor little guy.

This is why I am loathe to grow medicinal herbs that can be poisonous or simply make you ill, like pennyroyal or lobelia.  I've watched Tristan eat purslane from the edge of the driveway, and seen Anya rub lemon balm between her fingers to inhale the scent, and seen both of them collect catnip for the kitties.  And I had resolved only to grow safe plants, because of the kids.  But the problem with this rule was made apparent to me tonight: I like spicy food, but cayenne peppers cannot be considered "safe" in a household containing small children.  Usually Tristan only picks veggies when I'm out there, with some guidance... but not so this evening.  A ripe cayenne, after all, is a gorgeous thing.

Perhaps next year I'll tie tinsel on the "dangerous" plants.

Already, a gun fired at school

It wasn't a usual school shooting, but a boy in Ohio did fire a gun twice in a school hallway yesterday.  He was apparently intending to kill himself, and was maybe practicing firing the gun.  The principal and assistant principal talked him into dropping the gun.

What struck me was this:

"He did put the gun to his head numerous times," Lombardo said. "He never really said why he was doing it. He did say it wasn't like him to do this, and he was fearful that he had ruined his life."

In a local news video, the principal reiterated: "He was basically saying it wasn't him, he doesn't know why he's doing this."

Yeah, that's called dissociation.  "I'm not me," the kid is saying; "this is not real."  In his case, his own existence did not seem quite real to him.  In other cases, neither the other students and adults in the school nor their own existence seems real, which makes it easy to both murder others and commit suicide.  This disconnection from reality can be a side effect of common psychiatric medications, as discussed in this article on psychiatric drugs and school violence.

Whenever there is a school shooting, I assume a priori that anti-depressants, anti-psychotics, and/or ADHD stimulants were involved.  So far I do not know of any school shooting where the kid was not medicated.  Columbine happened a few days after Eric Harris's Luvox dosage was doubled; Kip Kinkel was taking both Prozac and Ritalin; the Virginia Tech murderer was on anti-depressants.  Doctors prescribe these drugs but fail to monitor kids afterward, even though we know that suicide, violent thoughts, and psychosis are more common side effects in adolescents than in adults.

The argument that these kids were crazy to begin with, so of course they were on meds, does not stand up.  In most cases newspaper reports suggest the shooters were fairly normal until recently, and/or did normal and everyday things just prior to the incident.  Eric Harris and Dylan Klebold, as we all remember thanks to Michael Moore's film, attended their 1st hour bowling class before going on to murder classmates.  And in the days just before their rampage, they had flirted with girls and talked about prom.

If parents want safer schools, they need to mount campaigns to reduce the percentage of students taking psychiatric drugs in their communities.