Tuesday, April 30, 2013

The Original Bailout Lie Routine

It is amazing what is thrown around as hype or scary by the people who testify in front of Congress to pass legislation or perform some act for the good of the country. While a classroom or two of little white kids getting shot by a deranged individual is enough to get the media and left wing agitators into a tizzy over gun control, a bombing killing 3 and wounding scores can't move them on immigration. Wait, why did I bring up media and left wing double standards. Forget that. I was researching a specific bailout: the Mexican bailout of '95. It is the start of so much trouble that we still live with today. The Mexican bailout was easy to sell to President Clinton because the GOP had just swept into Congress and the threat of a drag of 1% on the GDP was enough to scare Clinton (I'm not kidding). It was a hard sell to Congress, and even Congress rejected it. The interesting part was the testimony by our Treasury Secretary, Robert Rubin. He bailed out Mexico yet every scare he used, if we didn't, turned out even worse. The event was a great example of how things work and a precursor for what was to come: propaganda, scare mongering and billions of taxpayer dollars.

Rubin testified to an angry and confrontational Congress about the need to bail Mexico out of some bad loans worth maybe $25 billion. Treasury wasn't quite sure how much. Congress was skeptical and saw this as a handout to Wall St. They were right. Rubin offered some frightening consequences for failing to act. His audience was not Congress as much as it was the media and the little people. If we don't bail Mexico out, there will be a 30% rise in illegal immigration. If we don't bail out Mexico, there will be a flood of drugs into the US and the drug war will get worse in Mexico. America didn't buy it. Congress said no. We still bailed Mexico out, which was really a bail out for the Wall St banks that had loaned money to Mexico as well as handled their privatizations in the '80s and early '90s. Wall St gambled on Mexico, and NAFTA did flood the country with more money than they could handle. Wall St forgot they were dealing with a 3rd world country (just 10 years after Mexico's 1st big default). Rubin was right for all the wrong reasons.

Rubin used a little discussed exchange stabilization fund to hook the Mexicans up for about $25 billion. Their currency lost value and unemployment went up. Wait, isn't that a reason for people to leave a country + earn foreign currency? Despite Rubin swooping in to save the day all of his scary consequences happened on steroids. Immigration from Mexico rose by 66% per year after the early '95 bailout, not 30%. The Cartel Wars got significantly worse to the point where even the tourist areas are scary, and there are no signs of them slowing down nearly 20 years later. Depending on the geopolitical genius you speak to, Mexico is either the next rising power or a borderline failed state. This is all after we did exactly what Rubin wanted. Rubin was throwing whatever talking points would affect politicians but more importantly be picked up by the news media and reported for you at home. He had no real feel for what would happen. It was all manipulation to get the public to feel comfortable with the bail out. It was nearly 20 years ago, but it was a pattern repeated over and over again. Big Wall Street bets, profits, bets get too extended and go bad, big scare, bailout. It's just that the stakes got raised as the bets got bigger. Our banker owned government has its roots way back in Mr. Rubin's prime days.


peterike said...

Our banker owned government has its roots way back in Mr. Rubin's prime days.

Our banker owned government started in 1913 with the creation of the Federal Reserve, and it's been downhill ever since. Congressman Charles Lindbergh Sr. would say of it: "This Act establishes the most gigantic trust on Earth. When the President signs this bill, the invisible government by the Monetary Power will be legalized. The people may not know it immediately but the day of reckoning is only a few years removed... The worst legislative crime of the ages is perpetrated by this bill."

Thanks, Woodrow!

Son of Brock Landers said...

I think we've discussed this before. I agree with you. Banks partnered with Wilson in '12 and got what they wanted. We did a good job holding the Wall St crowd at bay for decades though in the 20th century. Our modern bankocracy starts with Rubin.