Radical Avenue

After two or three false starts, the US Treasury has finally come up with a plan for private investors to purchase toxic assets owned by troubled banks. We’re to believe that this new deal will then free up credit markets and get the economy rolling again.

How long will it take for our government to realize that throwing money at toxic assets won’t make them go away? The administration should announce more solutions that don’t cost taxpayers anything, like stringent enforcement of financial industry regulations.

No More Too Big To Fail
After the Great Depression, Congress enacted anti-trust laws to prevent the formation of monopolies because monopolies stifle fair competition. When monopolistic companies fail it can be catastrophic for the economy. But no one has been enforcing the anti-trust laws over the past thirty years or so, and unfortunately the results are predictable.

AIG has a monopoly on financial services insurance and banks around the world are completely dependent on this insurance, so now American taxpayers must keep AIG propped up indefinitely. Poorly performing companies should be allowed to fail. Capitalism in America requires it.

No More Bundled Mortgages
The risk of mortgage default depends on the creditworthiness of individual homeowners. Analyzing the viability of stock in a corporation involves an entirely different set of calculations. Bundled mortgages aren’t securities and shouldn’t be sold as that type of a commodity.

No More Credit Default Swaps
We keep hearing the line about how credit default swaps are so complicated that they can only be unraveled by the same Wall Street whiz kids that created them. Nonsense, credit default swaps are nothing more than dishonest transactions concocted by unscrupulous people in order to make a lot of money in a short period of time.

No More Bailouts
The US financial industry does not police itself well against fraud. To the contrary, it encourages malfeasance by rewarding risky behavior as long as the cash keeps flowing in. Now our government wants to pass the cost of Wall Street’s failures on to our grandchildren, with interest. No thanks.

I’m guessing that about twenty years ago while a bunch of politicians in Washington were saying “you know those fellers in China could sure be useful to us someday”, a gathering of politicians in Beijing agreed that “the Yankees are like hungry birds that fly too low and squawk too loudly.” China and the United States have crossed paths a lot in the past two decades.

Traditionally, US citizens purchase merchandise Made in China, and China lends our government enough money to underwrite our extravagances. But now the US and China are convening over a mining project in a highly volatile part of the planet. In the mountains south of Kabul, the US Army will provide security for a Chinese plan to extract raw materials from the Aynak copper reserves.

US troops have already enhanced their presence in the Logar province of Afghanistan, where Taliban fighters continue to harass them. The Army will also protect a dirt road which a Chinese firm is paving as part of a $3 billion project to begin mining in the region. But surely Chinese investors don’t expect the short attention span Americans to stick around forever. When US forces leave, the task of protecting the mines will presumably fall to Afghan soldiers and Chinese security personnel.

This investment by the Chinese shows a lot of faith in the future of central Asia. While the copper will provide resources to support Chinese manufacturing interests, the risks are substantial. For Afghanistan, the potential benefits are obvious, including private employment opportunities, infrastructure improvements and all of the benefits that flow from long term international investments.

I guess “leftist” is alright again in America. Not so long ago, charges of leftist politics conjured up vague notions of Soviet battleships anchored in American ports. Leftist meant Marxist, which means communism, which communists call socialism. Now socialist governments are the ones that bailout bankers who get caught with their pants down as the bottom drops out of the free market.

By all indications the new President-elect of El Salvador, Mauricio Funes, will emphasize public services more than his predecessors, while maintaining a consistent foreign policy. “This is not the time for revenge. This is time for political understanding,” Mr. Funes announced. “The time has come for the excluded, the opportunity has arrived for genuine democrats, for men and women who believe in social justice and solidarity.”

President-elect Funes, of the FLMN, recently won a close election against Rodrigo Avila of ARENA. The FLMN includes many Salvadorans who fought against the United States and its allies in the 1980s. ARENA has controlled the government since the cease fire of 1992.

Mr. Funes has a number of reasons to favor positive relations with the United States. Dollars are the official currency in El Salvador, which has seen an influx of investment from the US. El Salvador and the United States are both members of the Central American Free Trade Agreement. The many Salvadorans living in the US have a keen interest in the politics of their homeland, and turmoil is bad for business.

It is encouraging to see a peaceful transition of power from one political party to another in El Salvador. If Mr. Funes and his FLMN allies can deliver on their positive agenda, Salvadoran voters will probably elect to keep them in charge.

While the Dow Jones and Nasdaq falter, other marketplaces continue to thrive. For example, the European Climate Exchange and the Chicago Climate Exchange have both trumpeted solid increases in volume over the past few months. Climate exchange markets allow companies to offset the cost of their carbon emissions with investments in conservation projects. This cap and trade system has been popular in Europe for years and is now favored by the Obama administration here in the United States.

Strong climate exchange markets indicate that money will still flow to reforestation projects around the world, like the one currently under way in the Philippines. Over 43,609 hectares were reforested by the Department of Environment and Natural Resources (DENR) last year, exceeding its 2007 record of 27,838 hectares by 55 percent. DENR Secretary Lito Atienza credited President Arroyo’s efforts to expand reforestation activities in the country, especially in river basins that feed agricultural plains along the Pampanga River Basin, Bicol River Basin, Cagayan River Basin and the Laoag River Basin.

In addition to protecting and beautifying the planet, reforestation projects bring employment to rural villages. In the past, the natural resources of growing countries have been exploited by foreign groups, leaving politically disadvantaged communities devastated. Reforestation projects reverse that trend.

Reforestation also protects the habitat of endangered species, like the little rodent scientists recently discovered in the dwarf mossy forests of Mount Hamiguitan on Mindanao Island. Weighing in at a mere 75 grams (6.2 ounces), the Hamiguitan batomys has a long furry tail and a modest demeanor. These diminutive critters must be delighted by their government’s commitment to healthy woodlands.

AIG is the oversized tabby perched on an empty chair before dinner, just waiting to snatch a morsel from some unsuspecting kid’s plate. Feeding this lumbering butterball any more of anything won’t help. The cat needs to go on a diet. Let’s toss AIG outside and let it fend for itself with all the other animals.

While using phony credit default swaps to generate enormous profits from fees, AIG failed to set aside enough money to cover the “default” portion of the swap. They assumed that Lehman Brothers would never go out of business and that the housing bubble would never burst. But that it is the job of an insurance company, to anticipate and plan for the unexpected. AIG is a lousy insurance company, unworthy of more handouts from the US Treasury.

Repeated bailouts of AIG are really just back door bailouts of the financial organizations that AIG insures, like former treasury secretary Henry Paulson’s old company, Goldman Sachs. Without the AIG cash infusions, those companies would falter as well. No one on Wall Street seems willing to deal with the consequences of their failed strategies, much less admit to having done anything wrong.

Federal Reserve chairman Ben Bernanke continues to claim that AIG is too big to fail. This is the group that received $85 billion from taxpayers last September, $65 billion last November and another $30 billion last week. And the company still can’t tell us how much more they’ll need. AIG has already failed.

AIG’s problems should be dealt with by the judicial branch of our federal government, not the legislative and executive branches. Insolvent companies belong in bankruptcy court.

The residents of Toksook Bay, Alaska don’t worry much about getting shipments of heating oil on time in the winter months anymore. A trio of new wind turbines now generates electricity all year round in this remote fishing village.

In central Africa, solar ovens are saving lives. Displaced Sudanese women living in refugee camps near Darfur now cook meals without having to build a fire. This means that no one needs to venture out into the countryside in search of firewood, where militia groups prey on unarmed civilians. The solar ovens are really just cardboard boxes lined with tin foil, a refreshingly simple solution to a terrifying problem.

That’s the beauty of renewables. Virtually anyone can collect energy from the sun and wind using relatively inexpensive tools. Consumers don’t need incoming electrical lines or shipments of oil to survive anymore. Power to the people!