Long regarded in the US as a folly of Europeans, nationalization is gaining rapid acceptance among Washington opinion-formers – and not just with Alan Greenspan, former Federal Reserve chairman. Perhaps stranger still, many of those talking about nationalizing banks are Republicans. Lindsey Graham, the Republican senator for South Carolina, says that many of his colleagues, including John McCain, the defeated presidential candidate, agree with his view that nationalization of some banks should be "on the table". Mr. Graham says that people across the US accept his argument that it is untenable to keep throwing good money after bad into institutions such as Citigroup and Bank of America, which now have a lower net value than the amount of public funds they have received. – Financial Times
Dominant Social Theme: The heck with definitions. Let's tackle this mess logically and do what has to be done.
Free-Market Analysis: We hope when the dust has finally settled that one of the Bell's modest contributions to 21st century emergent "devolution literature" may be to help unpack the euphemisms of its disaster-speak.
Life is short and most things in life are relatively simple. Thus it is, when you get a lot of complex talk on an issue, you can almost guarantee that someone is dancing around the point – faster and faster to obscure it. (Listen to one of Barack Obama's latest press conferences to see what we mean.)
Euphemisms serve at least three purposes. First, they provide a short-hand for longer and more complex topics. Second, they render whatever crisis or complex procedure is taking place a little less obviously intimidating by reducing a problem to a catchword. Third and most useful (at least to the monetary elite grappling with the current crisis), they tend to drain away meaning with overuse. Their import is lessened after time and their familiarity makes the concepts they embody less intimidating.
What are some of the most useful euphemisms thus far, when it comes to the current fiscal crisis? There is "bailout" of course, and "stimulus" and the ever-useful "stabilization." But one of the most interesting words now emerging is "nationalization." We are hearing this word more and more and, yes, it is of course a euphemism for something else. Here is the obvious definition – Nationalize: Transfer business to state ownership: to transfer a business, property, or industry from private to governmental control or ownership. (Encarta.com)
For free-market thinkers, the first mention of "nationalization" is a shock because it is so foreign – antithetical – to Western civil tradition. But over time, the shock lessens, inevitably, and simple familiarity with the word makes us feel somehow that we know what it entails. The familiarity with the specific terminology also makes us feel less threatened – if we are inclined to be nervous or fearful in the first place. Of course the concept hasn't changed. The damage it may entail hasn't changed. But because we have heard about it so much, we feel better at least marginally better about it.
Let us examine "nationalization" more closely. The definition reminds us that it is the public takeover of private enterprises. In the case of banks, government would step in, sort through wreckage and begin the process of setting bank affairs aright. Here is how it would work, according to the above article: In the early 1990s Sweden nationalized its banking sector then auctioned banks having cleaned up balance sheets. "In limited circumstances the Swedish model makes sense for the US," says Mr. Graham. Mr. Obama last weekend made clear he was leaning more towards the Swedish model than to the piecemeal approach taken in Japan, which many would argue is the direction US public policy appears to be heading.
Is it really so cut and dried? No, we think this sort of explanation indeed dances around the point. How can we prove it? Imagine an EU or American leader stepping up to the microphone and speaking frankly about nationalization as follows:
"Ladies and Gents, I could tell you we have decided to take over the banking system because our economy needs stabilization in order for our current stimulus to work. But let's dig deeper. Our system of economics — developed in the 1600s to fund British war by substituting worthless royal paper for gold and silver — worked so well that we were persuaded to standardize it throughout the world. By the late 20th century literally hundreds of central banks were engaged in printing paper money which inevitably caused a gigantic bubble and then a great crash, several of them in fact. We are living through the latest and greatest right now.
The logical solution to the mess we are in would be to return to banking's free-market roots and start over. Let private bankers offer to warehouse gold and silver and then make profits from that warehousing as best they can within a free-market framework and without government interference. There would be plenty of capital for worthy projects, the business cycle would be aggressively mitigated and gold and silver-backed money would not entertain wild swings in value. In fact, a person's holdings would gradually accrue over a lifetime as technology made individual lifestyle's increasingly more efficient.
Unfortunately, that is not what we are going to do. We are going to rebuild the current system on the ashes of old. We are not going to admit that the system has failed, that most of your investments are worthless and that your money-warehouses never did serve as a repository of value and are now obviously insolvent. No, we have decided to use the awesome power of government to prop up what has blown apart, to re-cobble what has been irretrievably fractured. By insisting the system is credible, we buy time to make it so. By aggressively supporting the system, we reconfigure without rebuilding.
Ladies and gentlemen, you must never repeat what I have said. It's simply too upsetting. Only use the words you have been given to describe the current situation as everyone else does. Use them over and over, until they are meaningless and obscure the reality of what is taking place. The problems will not be solved, but at least everyone will feel better about them.
The above speech, while truthful, is pretty blunt isn't it? That's the difference in our estimation between truth and euphemism. A pretty wide stretch, after all. The mainstream press and monetary elite are in the business of euphemism – which gives blogs and opinion sites like the Daily Bell plenty of wiggle room. In fact, if the Masters of the Universe really wanted to launch an Internet crackdown and strip electronic media of readers they could do so by "telling it like it is," by offering up reality rather than metaphor, and straight talk rather than sound bites. Think they will?
You could hear a lot of talk about nationalization over the next weeks and months, we would think – whether or not it occurs. And yes, after a while you may grow inured to the concept. But in fact nationalization is not shorthand for "government taking over banks." Nationalization is actually another way of saying the global system of fiat money has collapsed and the monetary elites are trying to buy time. They are using the full force of government to keep a failed system in place. The patient is unconscious and on life support, but they are hoping to jolt him back to life, pump him up with meds and send him on his way. When he relapses, they will simply do it again. And in the meantime, they are hoping very hard that you don't think about these issues very much. They are hoping you are too busy trying to hold onto your job, feed your family and take care of your health. Certainly, they don't want you thinking about protecting yourself by buying gold and silver. And heaven help you if try to circulate it like "money." They may even "criminalize" such conduct. That would be a euphemism, too.
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