Fed strong-armed BofA into taking Merrill Lynch
posted at 10:55 am on June 11, 2009 by Ed Morrissey
Bank of America CEO Ken Lewis has taken a lot of criticism for his agreement to absorb Merrill Lynch last year as the dominoes started to fall on the financial markets, but CNN Money reports today that the criticism may have been misdirected. Lewis didn’t choose to take the heavy losses of ML; e-mails obtained by CNN-M show that Ben Bernanke and the Fed threatened to remove Lewis and the BofA execs if they didn’t agree to the federal cramdown:
According to emails released Wednesday that pull back the curtain on heated negotiations, Federal Reserve Chairman Ben Bernanke had suggested to another Fed official that “management is gone,” if BofA managers tried to flee the deal and later on needed further government assistance.
The revelations come thanks to Congressional subpoenas demanding that the Fed disclose emails related to Bank of America’s purchase of Merrill. CNNMoney.com acquired copies of some of the emails circulated among House Republicans late Wednesday. …
Lewis told investigators in the New York Attorney General’s office earlier this year that he felt his job was on the line if he didn’t go through with the deal. Once Lewis learned last December of Merrill Lynch’s deterioration, he told then Treasury Secretary Henry Paulson that BofA was considering backing out of the deal, according to his testimony to investigators.
Paulson said that Lewis and the BofA board would be replaced if they sought to end the merger, which Paulson viewed as integral to the health of the U.S. financial system. Paulson told New York investigators that he threatened Lewis’ job at the behest of Fed chief Ben Bernanke.
As part of its newfound role as management critics on Wall Street, Congress had demanded answers as to why Lewis would have agreed to buy ML when its fourth-quarter losses were so bad. Now we know the reason why he did it. The government (and we should point out that this was the Bush administration) interfered in what should have been a private transaction and forced one company to buy another. It used extortion and intimidation to do it, making the Fed and the Treasury look more like a bumbling version of a syndicate — the Corleone Family as run by Fredo.
BofA’s spokesman tried to put the best possible spin on it to CNN, saying that a lot of heated words got traded in the exigent crisis of the moment, but that’s no excuse. Government cannot act to pick its own winners and losers. They have to act according to the law, especially in the business world. As the memos show, they had a backup plan to keep ML afloat if BofA refused to buy it, and in the end spent as much money bolstering the weakened BofA as they may have had to use to support ML.
The entire financial crisis shows the foolishness of government intervention (as opposed to common-sense regulation) in the markets, from the CRA all the way to the bailouts. Unfortunately, we still have the Fredos running the Family.
Blowback
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I thought this was already known last November?
Skywise on June 11, 2009 at 10:57 AM
Barney Frank still says Fannie and Freddie are doing fine.
Dire Straits on June 11, 2009 at 10:57 AM
I don’t mean to pry but where is the Obamateurism of the Day?
theguardianii on June 11, 2009 at 10:57 AM
Just wait til the BO administration emails are leaked. They will make the mob look like panzies.
txag92 on June 11, 2009 at 10:58 AM
……and now the bond market is strong arming Ben.
Starlink on June 11, 2009 at 10:58 AM
“Lewis has a credibility problem” or some other excuse causing this to be swept under the rug in 3… 2… 1…
SkinnerVic on June 11, 2009 at 10:58 AM
There was also a push to arrange a shotgun marriage between Wachovia & CitiBank, even though Wells Fargo had shown interest in Wachovia.
Citi was offering $1 per share.
Wells Fargo offered $7 per share.
Still wondering why Citi was even considered.
fluffy on June 11, 2009 at 11:00 AM
Hank Paulson and Helicopter Ben are a very very bad men!
Another case for appealing to voters via a smaller government message is the way to go.
WashJeff on June 11, 2009 at 11:00 AM
Sorry for the double post – highly relevant NOW…
Live Webcast of Ken Lewis
SkinnerVic on June 11, 2009 at 11:00 AM
so what else is new?
SHARPTOOTH on June 11, 2009 at 11:01 AM
Ohhh jeez! Check out the Drudge headline about exec pay,
WashJeff on June 11, 2009 at 11:02 AM
“and we should point out that this was the Bush administration…”
Sadly, this is the key. Obama has been bad and will likely get much worse, but in fairness he is merely following the dreadful precedents set by the Bush team during their last 6 months or so. I truly respect Bush and I am grateful for his service as our President. But his economic policy surrender last year was, in my opinion, a terrible mistake.
jwolf on June 11, 2009 at 11:02 AM
Don’t think the BofA shareholders are going to take kindly to this having been kept from them And commie Ruthie Ginsburg isn’t the only Supreme. :)
JiangxiDad on June 11, 2009 at 11:03 AM
Thank you OH, NC, VA, FL, CO, NV, and NM! Freakin’ idiots!
SouthernGent on June 11, 2009 at 11:03 AM
Where did my country go? It was mostly here just a year ago.
Daggett on June 11, 2009 at 11:04 AM
Doesn’t surprise me in the least. Bank of America has been one of the smartest institutions in the business throughout the last decade. For example, B of A got out of subprime mortgage lending in 2001. When it absorbed Countrywide it got a gigantic and profitable servicing platform and the best sales force in the mortgage industry for pennies, and stopped Countrywide’s subprime lending immediately. So it never made sense to me that B of A would have willingly bought Merrill. Everyone in the financial industry knew at the time that Merrill was bleeding to death, and frankly it deserved to. When the final books are written on this crisis, Merrill Lynch will be one of the biggest culprits.
What has yet to be discovered or reported is what made Merrill and Citigroup so special that neither was allowed to fail.
rockmom on June 11, 2009 at 11:05 AM
100 years from now, whatever Power is writing history… this chapter of American history will get a Darwin Award…
Everything that is happening, will be shown to be done at the behest of incompenents running the banks, and Government.
Romeo13 on June 11, 2009 at 11:06 AM
“Cram down“.
Why do I feel like we’re ALL getting a big dose of that gag-reflex-inducing throat choker?
Or is it just me?
tree hugging sister on June 11, 2009 at 11:07 AM
The DoJ action against Fiat also got dropped in December under dubya’s watch, so the Chrysler merger could proceed. He dropped the ball big time in the last two quarters of 2008.
a capella on June 11, 2009 at 11:07 AM
And yet THIS kind of Government intervention is ignored in the mad rush to identify the so-called failures of free-market capitalism.
It ain’t been “free” for a LOOOOOOOOONG time…
karl9000 on June 11, 2009 at 11:07 AM
Bernanke is really challenging Greenspan as the worst economic central planner in our history. What needs to happen here is the Fed needs to get audited. Call your congressmen and ask them to support HR1207, it currently has something like 200+ co-sponsors. Unfortunately my congressman, Mike Coffman, has yet to co-sponsor.
Ahh a Lion on June 11, 2009 at 11:10 AM
Sounds illegal to me.
Kenrod on June 11, 2009 at 11:11 AM
It wasn’t. And it won’t automatically return even if Reps. re-capture the Congress and/or WH. It’s almost like someone in France or England asking where the empire went. Poof.
JiangxiDad on June 11, 2009 at 11:12 AM
if this is true, wouldn’t it be Sonny or Michael or Vito, but not Fredo?
Fredo would’ve failed, and got slapped around
jp on June 11, 2009 at 11:12 AM
Doesn’t matter, the Fed is above the law and immune to oversight.
LevStrauss on June 11, 2009 at 11:13 AM
Why is the GOP sitting on this? Get Bernanke’s ass to the senate and probe this further. If this is true, he should be fired immediately and throw into a penitentiary.
promachus on June 11, 2009 at 11:13 AM
Wait, the FED can fire a bank CEO?
Crap, who gave them the power to do that?
Count to 10 on June 11, 2009 at 11:14 AM
Obama told me if I voted for John McCain I would get a third Bush term and he was right
karasoth on June 11, 2009 at 11:14 AM
Did Ken Lewis inform his board of his conversations with the government? Wouldn’t Lewis be better off if he had kept BofA out of a bad deal and then got fired? His shares would be worth more money and he’d be a national hero.
dedalus on June 11, 2009 at 11:14 AM
What started out as yet another chapter of “The Ousting of Ken Lewis”, seems to be devolving into the short story of clearing Ben Bernanke of being a bully. Nice try, though, Ruling Party.
ROCnPhilly on June 11, 2009 at 11:14 AM
Second look at dissolving the Fed?
Ron Paul looks smarter and smarter….
I can’t believe I just said that.
BPD on June 11, 2009 at 11:14 AM
I think the last six months or so of Dubya’s presidency can be summed up with “He meant well, but completely screwed up.”
The biggest problem was probably the choice of Paulson as SecTreasury as he was way too close to this crisis and the players involved, which seemed to have a definite impact on how he handled it. (He was the former CEO of Goldman Sachs and made a number of decisions that greatly benefited them, such as giving them a massive payoff to take over AIG.)
teke184 on June 11, 2009 at 11:14 AM
You know, I used to brush comments like that off as silly.
I’m not so sure anymore.
Count to 10 on June 11, 2009 at 11:15 AM
When Justice Ginsburg agreed to review the shafting Chrysler’s Secured Creditors received at the hands of the “Auto Task Force,” I breathed a sigh of relief thinking that the Court would rein-in the Obama Adminiatration’s excesses as it did Roosevelt’s. Boy was I naive! Whoever coined the term “Gangster Government” had it pegged.
potkas7 on June 11, 2009 at 11:15 AM
No one or group is smart enough for this role. The market and a commidity base moentary standard is the way to go and never should have been abandoned.
Calvin Coolidge said (H/T to Geroge Will):
This applies to the Fed and Obama.
WashJeff on June 11, 2009 at 11:15 AM
Oh, you’re going to get burnt for that…
I think many can agree that Paulian economics would be preferred to that of Obamanomics.
Upstater85 on June 11, 2009 at 11:16 AM
I can’t believe I am finding myself in agreement with that.
Count to 10 on June 11, 2009 at 11:16 AM
Sounds like it’s time for Ben Bernanke to be thrown under the B.O. bus!
pilamaye on June 11, 2009 at 11:17 AM
Sure to be a bumpersticker soon, true in my case:
Don’t blame me, I voted for Sarah Palin.
rbj on June 11, 2009 at 11:17 AM
Are you kidding? Geithner has stayed. No one on the Obama brain-team is going to get thrown under the bus.
Upstater85 on June 11, 2009 at 11:18 AM
Given that Paulian foreign policy is really the sticking issue, while not being much worse than Obama, sure.
Count to 10 on June 11, 2009 at 11:18 AM
Where’s the push back from Wall Street? Another bunch of whiny Beta males.
Cindy Munford on June 11, 2009 at 11:19 AM
most conservative’s problems with Ron Paul come from foreign policies not his domestic ones. I could live with his foreign policy ideas if I knew every President hence forth would utterly smash any country or group in a WWII way (i.e., TOTAL war) that threatened our national security.
WashJeff on June 11, 2009 at 11:20 AM
I’d rather not intervene than half-a$$ intervene while felating a bunch of tyrants in Cairo.
Upstater85 on June 11, 2009 at 11:20 AM
This is it.
bluelightbrigade on June 11, 2009 at 11:20 AM
One more reason that I completely and utterly dislike Bush and his administration. I liked him at first. A lot. After 2004 it was all downhill.
oddjob1138 on June 11, 2009 at 11:20 AM
Why aren’t these people in jail?
Knucklehead on June 11, 2009 at 11:20 AM
Probably true, but Ron seems to think that the country doesn’t need to protect its shipping lanes and access to foreign markets.
Count to 10 on June 11, 2009 at 11:22 AM
Gangsta Guvmint!
TheBigOldDog on June 11, 2009 at 11:24 AM
If this was true, I’d probably disagree with him. But he’d have to entertain the debate if he didn’t want to look like a complete hypocrite.
Upstater85 on June 11, 2009 at 11:25 AM
Here’s why
Upstater85 on June 11, 2009 at 11:26 AM
Barney Frank and Chris Dodd need to be in jail for their actions.
highhopes on June 11, 2009 at 11:26 AM
At the very least voted out of power.
Upstater85 on June 11, 2009 at 11:29 AM
I’d say that is only partially true. You can’t get thrown under the bus if you don’t get on in the first place. Notice how hard it is for Obama to find qualified people to nominate? An irrationally popular President should have three people for every nomination he makes. Instead, the Rats are trying to sneak Fannie Mae’s counsel in an Army job and it is blowing up in their faces.
highhopes on June 11, 2009 at 11:29 AM
private mercenary industry will fill the void?
BPD on June 11, 2009 at 11:31 AM
Not a Paulian… but… its a Nations responsibility to protect the Merchant ships flying its own flags…
The US Merchant Marine is almost non existant, we are busy protecting everyone elses ships… without having the legal authority to do so…
So… the Taxes from shipping companies go to countries while we spend money protecting them?
We can’t afford to be the worlds policeman any longer… we’re too far in debt. Problem is that other countries will NOT step up as long as we are doing the job for them.
Romeo13 on June 11, 2009 at 11:31 AM
Same thing for career politicians like these two. Not only do they have no marketable skills, Barney Frank and Chris Dodd love all the power and influence that comes with the job. If he isn’t able to lisp his way through important hearings as the Chair of some committee, Barney wouldn’t know what to do with himself.
highhopes on June 11, 2009 at 11:32 AM
Yeah, but I don’t see Obama tossing Geithner over the bus. Personally, I think it’s because he’s not very interested in things economic. He really doesn’t care who has this job, so long as they have the “correct” credentials on paper.
Upstater85 on June 11, 2009 at 11:32 AM
That’s for sure.
Upstater85 on June 11, 2009 at 11:33 AM
Denninger over at Market Ticker has been beating Bernancke like a bongo drum over this, and also over Denninger’s claim that, at the time he and Paulson were demanding that TARP be passed to provide liquidity for the banks, he (Bernanke) was actually draining liquidity from the system, creating his own little crisis. Sound familiar?
Bernancke and Paulson have some splainin’ to do. They were unguided missiles last fall, and W was asleep at the switch.
james23 on June 11, 2009 at 11:35 AM
That would actually be an interesting idea, if we could figure out a way of making the incentives work out for us.
We are the biggest beneficiaries of international trade, and we are better off raising that tax money to defend that trade than not, regardless of what is ‘fair’ with respect to the inputs of other nations that also benefit.
Come on, get a little more selfish, here.
Count to 10 on June 11, 2009 at 11:38 AM
This isn’t the 18th century.
lorien1973 on June 11, 2009 at 11:39 AM
If the GOP or independents can get a landslide in 2012, I recommend we break with tradition and put all these people in jail. That would help prevent another megalomaniac radical marxist thug administration from trying these tactics again for a long time.
Unfortunately, I’m predicting Obama will appoint himself dictator well before the 2010 elections, so we’ll probably never get the chance.
Daggett on June 11, 2009 at 11:39 AM
Perhaps its important to Obama that Geitner stay until the entire U.S. economy is government-driven. If we can still complain about the destroyed economy, Obama can say, “Yep, it is bad. Timmy fooled me, too.” Then he goes under the bus.
Sorry. Cynical today…
ROCnPhilly on June 11, 2009 at 11:42 AM
But it’s going to look like it real soon.
Knucklehead on June 11, 2009 at 11:42 AM
Oh, and we would be even deeper in debt if we weren’t safeguarding those sources of revenue. Our military is not why we have huge deficits. Heck, anybody care to calculate what percentage a flat tax we would need to cover our military spending?
Count to 10 on June 11, 2009 at 11:42 AM
Blackwater type companies could start hiring ex sailors. Considering the recent bouts of piracy you’d think some companies would start hiring these types anyway.
LevStrauss on June 11, 2009 at 11:43 AM
Frighteningly plausible.
Count to 10 on June 11, 2009 at 11:43 AM
Clearly… This sounds like a Bernanke rationale …
Hey, I don’t mind helping a ship in trouble, but I think it’s time the Europeans started spending a little more on protecting their interests… I guess you could say the French are trying…
Europe can afford to have its continually failing welfare state so long as the US defends her.
Upstater85 on June 11, 2009 at 11:44 AM
What revenue do we get from the Balkans?
Upstater85 on June 11, 2009 at 11:45 AM
So, the problem right now would be that current laws around the world make such mercenary action unfeasible if not outright illegal.
Count to 10 on June 11, 2009 at 11:46 AM
Well, I don’t think piracy is legal either… that said, my understanding is that it’s simply hard to dock in a port if there are weapons on board.
Upstater85 on June 11, 2009 at 11:47 AM
Did I say I had a problem with not intervening in places like that? I was talking purely about the defense of trade routs, which Ron Paul seems willing to abandon.
Count to 10 on June 11, 2009 at 11:48 AM
Our military may not be the sole reason for having
but I don’t see how having troops in every corner of every barbaric country somehow helps the deficit.
Upstater85 on June 11, 2009 at 11:50 AM
That would explain it. Same defense they want us to use in DC, dial 911, point the phone at the robber, and he will magically go away.
LevStrauss on June 11, 2009 at 11:50 AM
Come now. This isn’t the 18th century.
Upstater85 on June 11, 2009 at 11:51 AM
Neither do I. But placing them strategically keeps wars down, and keeps the trade flowing.
Count to 10 on June 11, 2009 at 11:54 AM
It was known per the 60 minutes interview with Ken Lewis. Bernanke said he didnt’ coerce Lewis during a hearing with Congress just last month. That made people think Lewis was a ‘scum liar’. These emails show that Lewis was telling the truth and Bernanke’s credibility is shot.
That’s the difference.
ThackerAgency on June 11, 2009 at 11:54 AM
Agreed, for the most part.
I’m not exactly sure where you’d have the placed though.
Upstater85 on June 11, 2009 at 11:56 AM
What happened in the “magic” year of 2004 to change your mind?
Del Dolemonte on June 11, 2009 at 11:58 AM
That can be tricky, and certainly beyond my resources. But, in general, you are looking to passify hot spots near locations of resource or general economic production and trade routs.
Count to 10 on June 11, 2009 at 11:59 AM
The Federal government has absolutely zero power over the Federal Reserve. Even the appointment of the Chairman is up to the Fed’s member banks (granted they do compile a list and give it to the President for a choice, but my guess is there is only one name on that list). The president has no power to fire Bernanke, the congress is not allowed to audit the Fed’s books, Bernanke is not even required to testify in front of the Congress. The Fed has unlimited power to print as much money as it wants, buy anything they want, and manipulate the market through arbitrary interest rates. The Fed is not above the law, the Fed is the law.
Ahh a Lion on June 11, 2009 at 12:01 PM
Thank you, Judge Dredd.
BPD on June 11, 2009 at 12:05 PM
Bush was reelected. Although I believe that was also the year that the “conservative” Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act. Which already has unfunded liabilities estimated at $8.1 trillion.
Ahh a Lion on June 11, 2009 at 12:05 PM
I’m thinking more like late 12th, early 13th at this rate. Soon we’ll be living in fortified villages to protect ourselves against invaders, we’ll be bartering goods with each other, and subject to the whims of kings. Also, we’ll have crappy healthcare.
Good times!
Fallen Sparrow on June 11, 2009 at 12:08 PM
Total blackmail by Paulson. Total feckless cowardice by Lewis.
Ken Lewis, BOA: I did not think we needed TARP funds a the time we were asked to take them.
Rep Gerald Connolly D-Virginia: Was there any connection between your reluctance in accepting them and exhortations from Secy Paulson at that time to accept them and the issue of [having to] disclose the $12 million worth of [Merrill] losses that you just discovered?
Lewis: No, absolutely not.
Connolly: It never came up?
Lewis: No.
Connolly: Why did you accept TARP funds if you didnt think you need them?
Lewis: After hearing the various regulators I felt like given what tehy were saying about further deteriorations in the economy we should have a healthy fear of the unknown.
Connolly: How much in TARP funds did you accept?
Lewis: $15 billion
Connolly: That’s a lot of insurance against fear of the unknown.
Western_Civ on June 11, 2009 at 12:16 PM
Sorry, but I disagree.
One major reason we have a net trade deficit, is because transportation costs became cheaper than the internal vs external labor difference. Thus, manufacturing, for internal consumption moved overseas.
One reason for those low costs was that you could flag a Transport ship in Liberia for a very cheap price, and then pay Liberian taxes, while being protected by the US Navy. Thus those tax revenues were lost to the US, thus they do not support the worldwide Police function of the US Navy.
We used our tax dollars to protect the very shipping (of other countries) which economicaly forced American manufacturing jobs to move overseas.
Romeo13 on June 11, 2009 at 12:18 PM
I agree. I’m just so disillusioned right now, and depressed. I just can’t help but feeling so sad over all of this, and watching the destruction of the country I love so much. :(
capejasmine on June 11, 2009 at 12:21 PM
Remember, it’s always darkest before the light. Make sure not to simply equate Republicans with light, they are just as guilty as the Dems. Only a real revolution in thought and policy will turn the country around, and that can’t happen till everyone understands the folly of a centrally planned state.
Ahh a Lion on June 11, 2009 at 12:28 PM
Larry Summers wants his job BADLY. It is not out of the question that this is all a giant setup so that Bernanke eventually gets “blamed” for some of this stuff and is forced to resign.
rockmom on June 11, 2009 at 12:29 PM
BTW, I am surprised that HA has not mentioned the fact that the Fed has just hired a lobbyist for the first time ever – and it’s Linda Robertson, who once lobbied for ENRON. Now, why would Bernanke think he needed a lobbyist?
Fed hires lobbyist
rockmom on June 11, 2009 at 12:32 PM
Always? sometimes its darkest just before they start to shovel dirt onto the top of your coffin…
Romeo13 on June 11, 2009 at 12:34 PM
Congress is trying to pass legislation to Audit them.
Ahh a Lion on June 11, 2009 at 12:37 PM
It is fascinating to see the part that Geithner played in this before and after his becoming to power. Whenver you see pre-2009 ‘NY Fed’ you see the hand of Geithner, as he was the head of the NY Federal Reserve.
The Federal Reserve’s predecessors was abolished, how quickly we forget that act to remove power from government. Somehow we never do hear about rollback of government power, and yet our ancestors did just that to corrupt organs of government. The exact, same ills seen then now happen again and we are shocked (shocked!) that such well meaning things can go so ill… of course if you want to get rid of a festering, rotting part of the zombie that is government, how quickly the defenders of the mobile corpse appears to say how much good it does seeking to devour our livelihood and our liberty.
And how quickly we have forgotten the actual Laws of War as they came from their source to us over the centuries… it is perfectly legitimate to authorize private organizations to fight for the Nation: that power is right there, in the Constitution. As was understood at the founding it is, indeed, reprisal of equal scale against those that wrong us and cannot be gotten by any civil means, nor by ordinary military measures. But mention that, point out where it is, demonstrate the history of it and how the Nation used that to defend itself when it had no navy nor much army to speak of and people shake their heads. It is neither illegal nor immoral to seek reprisals via authorized and acknowledged means sanctioned by government openly and freely. Actually getting covered under the Laws of War while doing that is accountability.
I disagree with Ron Paul on many things, but not those two as they are directly related to the history of warfare and how our society has gotten rid of ill-conceived and run parts of government. Strange that remembering history should be considered ‘conservative’… yet it is slowly becoming radical, just like in the lead-up to 1776 when Common Sense became the rallying cry for Revolution.
ajacksonian on June 11, 2009 at 12:55 PM
Actually, the trade deficit has nothing to do with this argument — it is really only a measure of net investment, and not related to prosperity.
All trade increases global production, which increases American prosperity. Though it would be hard to track down the effects directly, trade between two foreign countries ultimately boosts US production. We want to protect their trade, because it helps us.
Our “loss” or “outsourcing” of manufacturing has more to do with the extortive practices of US unions and the counterproductive regulation pushed by the left. It is going to other countries because we have said we have punished it, the same way that the productive immigrated to the US from nations that punished them. Blaming trade is like blaming the taxi driver who drives off with your slave after he has slipped his chains.
Count to 10 on June 11, 2009 at 1:01 PM
Why the hell aren’t the law suits flying? It is illegal to use one’s power to blackmail – even a US company and its board of directors. This is treason in addition since there is no way this was in the best interest of the US citizens.
katablog.com on June 11, 2009 at 1:07 PM
Didn’t we used to have guidelines on what the government could and couldn’t do? I believe it was called “The Constitution.”
Star20 on June 11, 2009 at 1:08 PM
“Failed policies of the past…”
-BHO
BPD on June 11, 2009 at 1:14 PM
If you believe that, Wow… just wow… so giving the Saudi’s BILLIONS of American dollars has HELPED the American economy? More than if we had drilled here and kept that wealth here?
In ALL trade there are winners and losers. There are buyers and sellers… and when it goes across International lines, it creates Trade imbalances, and wealth transfers.
We have consistantly exported American wealth for years, buying things from countries where labor was cheaper, but the ONLY way that works is with cheap transportation… ie, when transportation costs become less than the extra amount it would cost to manufacture that item internaly.
An overall economy can only sustain that exporting of wealth as long as its CREATING enough wealth to at least offset that transfer (and I’m talking THINGS, not money, when I talk about wealth).
We no longer create wealth in this country… we just move money around…. we don’t MAKE stuff… we outsource it… and then buy it with credit…
The whole system is unsustainable, and in the last year we have seen the first tremors of the coming Economic earthquake, which will finaly hit once the US cannot sell its bonds, and they call in those debts.
Romeo13 on June 11, 2009 at 1:40 PM
There are no losers in trade except those who fail to trade. You are making the mistake of conflating trade deficits with budget deficits, when they are in no way related.
Of course “giving” money to the Suadis doesn’t help us, but buying the oil they produce does — which is not to say that we wouldn’t be even more helped if drilling restrictions were removed and we could drill our own.
Also, do not be fooled into the delusion that the US no longer creates anything — we are still the most productive country on the planet, and even that which you call “moving money around” is ultimately responsible for the production of goods and services that would otherwise not exist. Money is not wealth: that which money buys is wealth. So, in fact, the US has been importing wealth all this time, because we are so productive. You are falling for the same victimist crap the Democrats thrive on.
Count to 10 on June 11, 2009 at 2:17 PM
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