The Christmas weekend edition of the Wall Street Journal, in a more or less upbeat voice, reports the collapse of the bank superfund for the bailout of the home mortgage crisis - or perhaps more specifically, the liquidity crisis. The reason for the positive tone is that the collapse is a consequence, for the most part, of the intervention of 'government linked funds' from foreign countries investing sizable chunks of cash in the major banks at issue. That, and the fact that a number of banks have brought the secondary instruments onto their balance sheets and taken the write downs, have provided a 'market solution' to the problem, at least for the moment.
            Investment funds from Singapore and the Middle East have apparently taken significant minority stakes in major American banks at issue.
            I keep hearing Dick Cheney, speaking before a group of wealthy supporters in the last presidential election cycle, saying something to the effect that, 'we are the ones who can protect your wealth.'
            The initial fear from the sub-prime collapse, of course, was the possibility of a fire sale in the secondary securities in order to maintain liquidity. Undoubtedly, we are fortunate to have avoided the possibility for the moment, even though it might have punished some of the legitimate suspects in this fiasco, as well as the end users.
            But, with the dollar tanking, it seems that a fire sale of sorts is in progress in any case. God bless the Republican presidential candidates for keeping our eyes fixed on 'immigrants' who, in certain cases, seem to be supporting the economies of some of our more impoverished neighbors, so that we don't notice the value equivalent of vanloads of cash being shipped to foreign investors from the Republican guarded security entrance.

            More than a generation ago, when the Japanese held the trading partner status now being taken over by the Chinese, the Japanese used their dollar denominated excess to purchase Treasuries, ultimately winding up with a significant portion of the US national debt. At this point, I have no way of knowing whether the Japanese were engaged in some conscious maneuver or simply lacked imagination. In any case, while I have no direct evidence, I have always assumed we used the then power of the dollar in exchange rates to whip the rug, so to speak, perhaps partially accounting for the ensuing, eponymous 'Japanese style recession'.
            But the weakness of the dollar today is apparently no maneuver on our part, but the real thing.
            I have already talked elsewhere in the blog about how an excessive credit business drives out industry first, and then drives out or depresses commerce itself. When transacting cash becomes more profitable than any other enterprise, who would invest in heavy capitalization? And who would willingly carry large inventory? One of the first businesses to succumb wholly to the arbitrageurs was the department stores, with their need for exposed cash and instant inventory turnover.
            The driven credit system in this country has finally exposed us from the top down. But perhaps I do something of a disservice by blaming it all on the Republicans. Undoubtedly, we hold collective responsibility as well. It's not just advertisements suggesting that cash or checks will jam the system. An America that buys according to a capacity to make payments on credit rather than on the basis of cash on hand is a nation that is prepared to sell itself to the highest bidder. But, in this case, of course, the highest bidder is using our own dollars. And the bidder is doing nothing other than acting in his or her self-interest, since foreign dollar holdings are apparently losing relative value on a daily basis. They might as well buy American assets. But, in this case, the assets are pieces of the American credit system itself.
            But who are we to care, if the Wall Street Journal doesn't mind?
            The fact that, in a digital world, credit is the ultimately portable business is neither here nor there.

            The only question I have is: who will capitalize America when it comes time to reindustrialize?
            Or are we going to start shipping our own 'migrants' over the borders to support our economy at home?