Trust America

Banking is and always was about confidence in banks.

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Trust is the main asset for a bank. Capacity to face losses and ability to find needed cash are banking basics and, fundamentals for trust in banks.  Once trust erodes, banks are squeezed out of cash they cannot easily replenish. They lend money while increasingly fewer lending institutions will want to lend it money at a rate where it can turn around and make money.

Therefore  ratios between assets and lending have to be close enough not to spread too thinly the capacity of bank to face losses.  1 to 40 in the USA , that ratio is about 1 to 12 in Europe.

Due to a lack of confidence in the quality of consumer spending, or further eroding real estate markets, with further immediate consequences on confidence among banks, or if there is lower economic growth, there will be more banking failures to come and there won’t be appropriate mechanisms to tackle them.

How far deep can the American problem become globally?

Global US derivative by products of US real estate is worth about $45 Trillion. (source: http://www.lefigaro.fr/marches/2008/09/24/04003-20080924ARTFIG00336-les-quatre-questions-que-pose-le-sauvetage-des-banques-americaines-.php)

Paulson situation reminds me of the situation Alexander Hamilton found himself into, as Minister of finance of the USA , when surrounded by speculators playing bearishly and pulling US treasury bonds down. Alexander Hamilton was quite savvy, buying back US T bonds at their lowest and reselling them high. He made substantial profits for the US treasury.

Paulson Plan values assets at the lowest bid, (reverse bid) so as to give a chance to the US Treasure to make profits reselling assets at a higher price. An obvious advantage for the state while a disadvantage for banks which see similar assets valued accordingly.

How can his plan bring back trust if it is not a global plan, and if there is neither Governmental nor private financial institution able to play regulator and warrantor? 


Had Europe had a European treasure, it could have joined in with the Paulson plan. Japan declined.  So, instead of creating the beginning of a global government Financial management, which would have restored trust globally, where trust is a fundamental component for ending a banking crisis, each individual European country will act on its own, so will Japan and the USA .

Every nation for itself, himself.

US real estate market continues to degrade.

  • US federal Public Debt is $ 9.6 trillion in 2008 =  68 % GNP.  Paulson will bring gross debt to 70% of GNP, a first since 1954, Bloomberg agency says
  • Cuts in Federal spending will be unavoidable.

Federal spending cuts should be focused on military spending cuts first because military solutions are costly and less productive than development solutions.

Let’s lend money to Afghani people and companies who want to develop. 

Let’s deal with the afghan war treating it like an opium war, legalizing opium and making dependency a social not a correctional issue, thereby ending the War on Drugs. It will starve those who count on opium revenue to purchase weapons for their often feudal fights.

Let’s keep our troops out of Iraq and make renewable energy the focus of our industrial and infrastructure rebuilding.

Let’s give universal health care to all US citizen.

Let governments fund the education of the willing.

It will produce solid economic growth.

Let’s rebuild trust in America to build at last the global world.

The world needs both government and freedom to act, both with accountability and responsibility.
We need capitalism running between sound institutions, not running wildly through the world. 

It seems to me that we need global institutions, global law, global bank, global environmental practices, global freedom of mobility with globally guarantied human rights enforced by local authority, global human development management, global health care, etc,.

America would do well to get rid of its electoral college and have direct democracy, not indirect democracy, and it should have participatory democracy, with a rule of law where the local gets top billing, as in the confederation of Switzerland where the main share of taxes goes to the municipality.

America and the world need to be rewired from the bottom up.

The world needs to wire itself from the bottom up.

Countries should unite and finally create the global institutions needed to face and balance development.


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