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Lawmakers in Congress appear to have assumed that the federal government will simply borrow more money to foot the bill for the bailout. The national debt ceiling will rise to a whopping $11.3 trillion, up from $8 trillion a year ago.
But this rush to borrowing merely shifts the bailout burden onto the backs of future taxpayers. Congress needs to change course -- and develop a "pay as we go" plan that makes Wall Street pay.
The lion's share of bailout funding should come from the high-finance gamblers and the wealthy CEOs who have so profited from our casino economy.
"The point everyone misses," wrote economist Robert Chapman a decade ago, "is that buying derivatives is not investing. It is gambling, insurance and high stakes bookmaking.
And there's the catch: what if the hedge fund doesn't have the $100 million? The fund's corporate shell or limited partnership is put into bankruptcy; but both parties are claiming the derivative as an asset on their books, which they now have to write down. Players who have "hedged their bets" by betting both ways cannot collect on their winning bets; and that means they cannot afford to pay their losing bets, causing other players to also default on their bets.
The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme. The potential for this sort of nuclear reaction was what prompted billionaire investor Warren Buffett to call derivatives "weapons of financial mass destruction." It is also why the banking system cannot let a major derivatives player go down, and it is the banking system that calls the shots. The Federal Reserve is literally owned by a conglomerate of banks; and Hank Paulson, who heads the U.S. Treasury, entered that position through the revolving door of investment bank Goldman Sachs, where he was formerly CEO.
In congressional hearings in the early 1990s, derivatives trading was challenged as being an illegal form of gambling. But the practice was legitimized by Fed Chairman Alan Greenspan...
Since then, derivative trades have grown exponentially, until now they are larger than the entire global economy. The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that's 1,000 trillion dollars.
And there's the catch: what if the hedge fund doesn't have the (money)?... The dominos go down in a cascade of cross-defaults that infects the whole banking industry and jeopardizes the global pyramid scheme
A $130 billion annual investment in renewable energy to stimulate good jobs anchored in local economies and reduce our dependency on oil.